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The credit-scoring formula from FICO is updated every few years to adjust to an ever-changing borrowing and lending landscape, with the FICO Score 9 being introduced in 2014.
Despite newer algorithms being rolled out – the FICO Score 10 and 10 T were announced earlier this year – lenders tend to rely on older versions until widespread adoption takes hold.
To gain a better understanding of the FICO Score 9 and how it’s different from FICO Score 8, we’ll take a look at the differences as well as best practices for building great credit.
- What is a FICO Score?
- Changes to the FICO Score 9
- Where to get your FICO Score 9
- Other types of credit scores
- How to build good credit
What is a FICO Score?
FICO stands for Fair Isaac Corporation, named for Bill Fair and Earl Isaac, who founded the company in 1956. There are a variety of FICO Score versions, but the one most commonly used by lenders when you apply for credit is still the FICO Score 8. The credit score range for both the FICO Score, as well its competitor the VantageScore, is from 300 to 850.
Factors affecting your FICO Score include the following:
- Payment history (35% of your score). Make at least the minimum payment due each month in order to maintain an impeccable payment history on your credit report.
- Amounts owed (30% of your score). This is also known as utilization. Experts recommend never using more than 30% of your credit limit. For example, if you have a $500 limit, don’t carry a balance more than $150.
- Length of credit history (15% of your score). Both the age of your oldest account and your newest accounts are considered along with the average age of all accounts.
- Credit mix (10% of your score). The different types of credit you have, such as credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.
- New credit (10% of your score). How frequently you open new accounts.
It’s worth noting that there are three major consumer credit bureaus – Equifax, Experian and TransUnion. Your FICO Score can vary depending on which bureau your information is being pulled from and how often your creditors are reporting information. For example, the Discover Credit Scorecard offers free access to cardholders and noncardholders alike and provides a FICO Score 8 pulled from Experian data.
Read our article explaining what FICO Score is considered good credit.
FICO Score 9 changes
The FICO Score 9 arrived on the scene in the summer of 2014. Compared with the previous version, the FICO Score 8, it offered updated treatment of unpaid medical collections and all paid collections, as well as the ability for rent payments to count toward one’s score if reported.
We’ll examine each of these changes and why they’re important to consumers.
More than 1 in 4 Americans who have credit reports have at least one debt in collections with a third-party debt collector, according to a 2019 report by the Consumer Financial Protection Bureau (CFPB). The study found that 58% of that debt consisted of medical debt.
The FICO Score 9 treats unpaid medical collections differently than other types of unpaid collection accounts – medical collections will not have as heavy of a negative impact when factoring those into a credit score.
In other words, if you’re working to rebuild your credit score while dealing with unpaid medical debt in your past, the FICO Score 9 makes it a little bit easier to do so.
With older FICO Score versions, even once you paid off debt that had been sent to collections, it weighed down your credit score. But the FICO Score 9 ignores paid collections accounts, meaning once you’ve taken care of old debt, you should expect to see your score improve.
An analysis of Census Bureau housing data, performed by the Pew Research Center in 2017, showed that approximately 43.3 million American households were headed by renters – meaning more households are renting than at any point since at least 1965.
Despite that, paying rent typically doesn’t affect your credit score. The FICO Score 9, however, will factor your rent payments into your credit score if those payments are reported. Be aware though that only a small number of landlords report rent payments to the credit bureaus.
Where to get your FICO Score 9
From your card issuer for free
Many credit card issuers offer cardholders free access to their FICO Score. Depending on what credit cards you have, you may have access to your FICO Score 9 through one of them.
For example, Wells Fargo credit cards provide a FICO Score 9 pulled from the cardholder’s Experian data. And the Apple Card offers a FICO Score 9 generated from TransUnion data.
Directly from FICO for a price
Consumers can purchase access to their FICO Scores and credit reports from myfico.com. FICO offers three monthly plans, ranging from $19.95 a month to $39.95 a month – specifying that every subscription comes with a FICO Score 8, and “may include additional FICO Score versions.” The FICO Score 9 is one of several versions listed as currently available.
Other types of credit scores
Different FICO Scores for different types of loans
As mentioned above, FICO rolled out the FICO Score 10 and 10 T in early 2020. With the FICO Score 10, one major change is that delinquencies (late payments) will hurt your credit score more drastically than under previous versions. Meanwhile, the 10 T incorporates trended credit bureau data, intending to give lenders a more accurate look at your behavior over time.
The version of the FICO Score that’s still most widely used is the FICO Score 8. However, depending on what type of credit you’re applying for, a lender may use other versions. For example, when taking out an auto loan, your lender may use one of the following:
- FICO Auto Score 2
- FICO Auto Score 4
- FICO Auto Score 5
- FICO Auto Score 8
When applying for a mortgage, there’s yet a different set of FICO Score versions used:
- FICO Score 2
- FICO Score 4
- FICO Score 5
Even the above do not constitute an exhaustive list of FICO Score versions – there are more out there. For example, when checking your score via a Citi credit card, you may find a FICO Bankcard Score 8 pulled from Equifax data, ranging from 250 to 900 rather than 300 to 850.
After FICO, VantageScore is the main credit-scoring method you’re likely to encounter. The latest version is VantageScore 4.0. Like most FICO Score versions, VantageScore credit scores range from 300 to 850. The following factors play a role in your VantageScore:
- Total credit usage, balance and available credit – extremely influential.
- Credit mix and experience – highly influential.
- Payment history – moderately influential.
- Age of credit – less influential.
It’s worth noting that both VantageScore 4.0 and VantageScore 3.0, like FICO Score 9, disregard paid collections (including paid medical collections) when calculating your score.
When it comes to unpaid collections, the VantageScore 4.0 model penalizes unpaid medical collections less than other types of unpaid collections – and ignores unpaid medical collections that are less than six months old, which allows consumers time to pay them off.
Issuers that provide VantageScore access to cardholders include:
How to build good credit
No matter what type of credit score your lender refers to when evaluating your creditworthiness, following these best practices will play into building a great credit score:
- Pay your bills on time. Falling behind on payments will damage your score quickly.
- Don’t max out your card. Keep your balances under control by paying off what you charge each month..
- Apply for new credit sparingly. Multiple credit applications over a short period of time sends a red flag to potential lenders.
- Keep your oldest cards open and active. Prevent a surprise card closure by your card issuer for inactivity by making a small purchase to your cards every month and paying them off on time every time.
- Keep tabs on your credit score. There are a variety of ways to check your credit score for free, so that you can be sure what you’re doing to build credit is working.
By following these good habits, in time you can build up an excellent credit score and qualify for lower rates and credit cards with premium rewards and benefits.