The probability of your score dropping when this new FICO 10/10T scoring system is implemented depends on how you utilize your credit. This new scoring model will hurt people who allow their statement to post high utilization amounts and possibly people who had previous items removed from their credit.
What is FICO 10 and FICO 10T Scoring?
FICO 10 is a new scoring system that was released this summer and will be implemented by lenders at the beginning of 2021. FICO 10T scoring will take into account your spending trends. This new scoring system was developed to allow lenders to predict the spending habits of consumers. With the current economic climate lenders are going to be trying to protect their money from people who will default on loans or credit cards.
The FICO 10 scoring range will remain on the same from 300 to 850 score.
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Key Differences between FICO 8 and FICO 10/FICO 10T
- FICO 10 takes into account your last 24 months of credit history.
- FICO 10 has utilization memory, meaning that maxing out a card one month and then paying it off will hurt your score. Compared to FICO 8 where there is no utilization memory.
- FICO 10T has Trend scoring. If your credit usage is trending up your score will lower. If it is trending down your score will raise
- Late payments will hurt your credit more.
- Delinquencies will hurt your score more.
- Personal loans will hurt your credit score with FICO 10 compared to helping your score with FICO 8
What Can You Do To Prepare?
Continue to pay your bills on time, make sure that you are keeping track of all bills so nothing is sent to collections. I would also suggest to pay down any credit cards that are over 30% utilization, because the new scoring will be able to see your previous balances.
If you were thinking about being added to someone's credit card as an authorized user, I would suggest that you do it before 2020 ends. If you have any personal loans and revolving credit it is probably a good idea to either pay the personal loans off or pay off the credit credit cards.
It is extremely important to make sure you maintain a good credit profile, because I believe that this scoring will be used to deny people from having access to credit, apartments, mortgages, and auto loans. Having a low score will make life much harder, so try your best to maintain or raise your score.
Thanks for reading I hope this allows you to be prepared for the next major FICO credit scoring model.
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