Up or down; Your FICO Score may be changing soon

Credit scores go up, and they come down. We all understand that fact, but usually there’s a direct cause and effect when your FICO Score hops or drops; i.e. you just maxed out all of your credit cards at the mall.

However, your score could soon be going up – or down – for little fault of your own! According to FICO, a new scoring model could create waves among consumers who see their scores on a roller coaster ride soon.

FICO Scores – a three-digit number that gauges your financial behavior as a credit risk – will soon give more credence to your debt levels, as well as emphasize reporting of personal loans.

With past FICO scoring models, your payment history (the biggest factor that goes into calculating your FICO), was based on an overall “snapshot.”

But with the new scoring model, more data will be collected and analyzed to factor into your score, including the historical trend of your payment history over time. That includes account balances going back up to 24 months, which will give FICO a lot more to base your score on.

Get ready, because depending on your credit usage and payment history, your new FICO score could rise or fall by up to 20 points – a new paradigm that will affect up to 80 million consumers, according to Dave Shellenberger, VP of Product Management at FICO. And 100 million Americans are expected to see just a “modest” score change.

In fact, Shellenberger predicts that about half of all consumers will see their score go up, and the other half will be disappointed.

Expected to roll out later in the summer of 2020, FICO’s score model update will effectively punish those with high levels of credit card debt (compared to their greater credit balances), have missed recent payments, or have other credit history snafus.However, consumers who keep relative low credit card balances make all of their payments on-time will be rewarded with a FICO bump. Consumers who fit this responsible credit profile also won’t see their score drop as much for larger, one-time purchases on credit cards or the sporadic high card balance.

Personal loans will be treated differently by FICO, as well. With an abundance of personal lenders and skyrocketing household debt (which is now $13.95 trillion!), if you are taking out personal loans regularly, you will see your credit score drop, as well.

The good news is that the average FICO score in America is now well over 700; 706 as of the end of 2019, which is an all-time high. FICO’s new score changes will still be business as usual as long as you pay your debts on time every month and keep your balances modest and under control.