Home > Credit Score > The New FICO Score: What It Means for You

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If you’ve always maintained a strong payment history with your cellphone and cable bills and want a little credit for it, you may be in luck. Credit-scoring giant FICO just announced a new scoring model designed to give credit scores based on people’s payment history with their phone, utilities and other bills.

LexisNexis Risk Solutions and Equifax introduced the FICO Score XD to help lenders assess consumers who may not have a traditional credit history but have a strong record of paying non-credit accounts — things that are not in traditional credit scores. In the credit reporting and scoring industry, these people are called “credit invisibles,” and alternative credit scores like the FICO Score XD aim to make them visible to potential lenders.

For consumers who may be struggling to successfully achieve credit card approval, FICO Score XD uses alternative data to determine if they are creditworthy. This data tool evaluates phone, cable, utility payments and public records to generate scores on the same 300 to 850 scale used for standard FICO scores. (You can see what’s considered a good credit score on that scale here.) The alternative payment history on cable, cellphones and utilities is sourced from National Consumer Telecom & Utilities Exchange.

“Alternative data is a critical component and really a driver of financial inclusion,” said Ankush Tewari, senior director, Credit Risk Decisioning at LexisNexis Risk Solutions. “Banks and other lenders are able to expand their addressable market and grow their businesses by leveraging scores that are built on models utilizing alternative data.”

FICO isn’t the only one experimenting with alternative credit scores, and it remains unclear how many lenders will actually use FICO Score XD when evaluating credit applicants. There are dozens of companies with their own credit-scoring formulas, and these companies often have more than one scoring model (FICO alone has more than 50 FICO credit score formulas). That can make it difficult for consumers to understand their credit scores, because every score is different.

The good news is there are many ways to see your credit scores for free — you can get two free credit scores every month on Credit.com — but it’s important you don’t compare different scores to each other. The scales may be different (the FICO Score XD, for example, ranges from 300 to 850, but not all scores do), and the data and math driving the scores may be different, too. By tracking a specific credit score over time, you’ll see how your financial behaviors like payment history affect your credit.

If you don’t want to rely on the possibility of a lender using an alternative credit score in order to get credit, you may want to consider trying to establish credit with a secured credit card or a credit-builder loan.

Staying on top of your bills and keeping your finances under control are imperative to financial empowerment. You can view your credit score free of charge before applying for credit, an advisable measure. And be sure you know the basics when it comes to how your credit score is calculated.

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  • http://blog.credit.com/ Kali Geldis

    There’s a few things that could be at play here, so let’s dissect!

    First, there’s not just one FICO — there are many and your car financer/mortgage lender may have used two different kinds. For example, some car dealers use a special model that weighs your car payment history more heavily than your credit card payment history. The VantageScore is used in lending decisions as well as the FICO, just not with the lenders you used for the car and refi.

    The basics of good credit are pretty universal, which is why we recommend trying to work on the basics vs. getting lost in comparing scores. Also, not all credit scores use the same range. For example, a 650 in one scoring model may be equivalent to a 702 in another.

    Lastly, the score that’s being used matters, but so does the credit report. Your credit report may have some differences from bureau to bureau. For example, some creditors may not report to all three bureaus, so a credit score using a credit report that lists a credit card in good standing may be different from a credit score that uses a different report that lacks that account.

    Hope this helps!

  • R Lee

    I agree that consumers should have access to all of their credit scores, but with so many scores used by lenders …. why not simplify and reduce that number of scores, have a more uniform number of scores for specific types of credit, and eliminate the use of lenders developing and using scoring models developed and used by lenders. This way consumers can at least have a better idea of their scores and will not apply for credit thinking they qualify when they actually don’t , and penalize their report by adding an additional inquiry.

  • freefighter

    You’re absolutely right. We should be legally entitled to see these scores that have such an impact on our life. Not to mention we should see the formula that makes up each score.

  • Gadgetman

    Scores from Credit.com, Credit Sesame, Credit Karma are all useless because no lenders (banks, credit card companies) use FAKO scores, they us actual FICO scores that you have to pay for to get. It’s all a BS game and there is no such thing as a real free credit score. The only time you see your score for free is when you apply for credit and get denied. The letter they send will have the actual score, you can also ask customer service what credit report is used for example: Discover uses Transunion reports.

    • http://www.credit.com/ Credit.com Credit Experts

      Hi there. One of the free scores we offer is the VantageScore 3.0, which is a score lenders use. You can also get free FICO scores through some credit card issuers, if you’re a cardholder.

      • Gadgetman

        Ok I stand corrected but I have yet found any the uses VantageScore 3.0 because that score for me is pretty high 690+, which pretty proves my point in previous comments, if I knew which lenders uses that model then I would be applying to them because currently I’m getting declined on lousy store cards LOL!!!!

  • Gadgetman

    Yes there should be a law where the agency has to you what score model they use.

  • Jermaine Smith

    Honestly…who even cares anymore? My credit is solid; just purchased a home, have major cards with good limits, etc. But the process of getting to that point – let alone maintaining it – is such a *game*. The truth is, these companies have access to a truly absurd number of versions of scores – up to and including in-house calculations they manufacture.

    There’s no winning if you’re a consumer, because you can’t fight 40 different versions of your credit. If a company wants to find a way to approve you and give you a great rate, they will – but lord help you if they don’t want your business. It’s going to be an uphill battle if they feel like using the one version of your score that puts you into a different rate category. It’s a shame, and as another poster said, really needs better regulation.

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