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You probably know by now that people actually have multiple credit scores instead of just one. This is not only due to the different credit scoring models that exist; it's also because the three credit reporting agencies assign scores of their own. Break it down even further and you'll find there are multiple scores at work within the main scoring models—FICO and VantageScore—with one of the most popular being the FICO Score 8 credit score.
MyFico credit score
MyFico credit score
The Fair Isaac Corporation (FICO) says that FICO Score 8 is one of the most widely used versions, even though it's not the newest. If you're curious how FICO Score 8 works and why it matters, read on to find out everything you need to know.
What is FICO Bankcard Score 8?
While FICO Score 8 is one of the most popular types of credit scores used by lenders for the purpose of making credit decisions, you may have also encountered a very similar-sounding term—FICO Bankcard Score 8.
Generally speaking, FICO Bankcard Score 8 is the version of FICO Score 8 used in credit card decision-making. This means that, when you apply for a new credit card, there's a good chance the card issuer will see a FICO Bankcard Score 8 version of your score.
Note that, unlike traditional FICO scores that fall within a scale of 300 and 850, FICO BankcardScore 8 credit scores fall between 250 and 900.
How does FICO Score 8 work?
The FICO Score 8 comes about after FICO considers a range of factors relating to your creditworthiness and overall debt. Each of the credit bureaus—Experian, Equifax, and TransUnion—can give you its own credit score based on the unique information that may be different across each of your credit reports. FICO also says credit scores can be different even when the exact same information is listed in each bureau's credit reports since "each of the bureau's FICO scoring system was designed to optimize the predictive value of their unique data."
In any case, FICO Score 8 offers scores between 300 and 850 and bases your credit score on five important factors that provide a picture of your creditworthiness:
- Payment history (35%): This factor considers how often you pay bills on time. Even one missed or late payment can damage your score in this category. For the best possible FICO Score 8, you'll want to make sure you pay every bill you have before its due date.
- Amounts owed (30%): Also known as your credit utilization ratio, this factor looks at how much debt you have in relation to your credit limits. For the best results in this category, you should avoid owing more than 30% of your available credit limits at all times.
- Length of credit history (15%): This factor considers how long all your credit accounts have been open, on average. Keeping old accounts open can help you here—even if it's a credit card you're not really using.
- New credit (10%): This factor considers how much new credit you have, including how many credit cards you have opened or applied for in the recent past. The Consumer Financial Protection Bureau (CFPB) says that too much new credit can signal to lenders that your economic situation has changed for the worse.
- Credit mix (10%): Finally, credit mix is a factor that looks at how many different types of credit you have. It's possible to score better in this category with a mix of different credit types such as installment loans, lines of credit, and credit cards.
Does the FICO Score 8 credit-scoring model really matter?
FICO Score 8 credit scores are just as important as other credit scores you have, and maybe even more important since they're so widely used. The fact is, having a good FICO score (670 or higher) can unlock financial options you might not otherwise have, whereas having fair credit (FICO scores from 580 to 669) or poor credit (scores below 580) can make your financial life harder in multiple ways.
Some of the reasons FICO credit scores matter include:
- FICO scores determine eligibility for credit cards and loans. Lenders look at your credit scores to see if you meet their requirements for funding. A good FICO score can boost your approval odds.
- A good FICO score can help you get financing with the best rates and terms. Good credit also helps you qualify for preferential rates and terms each time you borrow money.
- Borrow without a co-signer. Having a good FICO score can help you get loans without having to ask a family member or trusted friend to co-sign.
- A good FICO score can help your job prospects. Employers can look at a version of your credit reports for hiring purposes. Having good credit can only help when this happens.
- Good credit gets you lower insurance rates. Insurance companies often look at their customers’ credit scores to assess risk. Good credit can mean you access lower insurance rates across the board.
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What makes FICO Score 8 different from previous FICO® scoring models?
Each new FICO credit score tries to improve upon credit scoring methods while making processes much more fair and equitable for consumers. With that in mind, here are some of the changes that came about with FICO Score 8, compared to previous scoring models:
- Authorized user impact reduced: Where being an authorized user on another person's credit card has long been touted as an excellent way to build credit, FICO Score 8 minimizes the benefit.
- Infrequent late payment impact reduced: People who occasionally pay bills late will see less of a negative impact overall.
- Impact of regular late payments increased: Serial late payers who are constantly behind on bills see a more substantial negative impact on their credit scores.
- Impact of high balances on individual credit cards increased: FICO Score 8 also considers individual cards with high balances as more troubling, thus negatively impacting credit scores more than previous scoring models did.
- Impact of small accounts in collections minimized: Also note that FICO Score 8 and additional newer credit scoring models ignore small balance accounts of less than $100 in collections.
Major differences between FICO Score 8 and FICO Score 9 credit-scoring models
FICO Score 8 is widely used, but there’s also Version 9, which was introduced in 2014. Here's an overview of the biggest changes that came out with FICO Score 9, according to FICO itself:
- Paid-off debts in collections are no longer a factor: If you paid off old bills that were sold to a collection agency, including unpaid medical debts, these debts can no longer impact your score in any way.
- Medical debts given distinction: Medical bills are treated differently altogether when it comes to FICO Score 9. This includes unpaid medical debt in collections, which will have a lower impact.
- More emphasis on paying rent: FICO Score 9 also gives consumers more credit for rental history when their rent payments are reported.
Alternatives to FICO Score 8
Version 9 is just one of the many types of FICO scores lenders may use. While you don't get to pick which score is employed when you apply for a loan or fill out an application for an apartment, other types of credit scores to know about include:
| FICO credit scores | Used for |
|---|---|
FICO Score 9 | Most widely used (along with FICO Score 8) |
FICO Auto Score 9/8/8/4/2 | Auto lending |
FICO Bankcard Score 9/8/5/2; FICO Score 3 | Credit card decision-making |
FICO Score 5/4/2 | Mortgage lending |
FICO Score 10; FICO Auto Score 10; FICO Bankcard Score 10; FICO Score 10T | Newly released FICO scores |
VantageScores are also used in decision-making for credit cards, auto loans, banking, and more. VantageScore types that can work as alternatives to FICO Score 8 include VantageScore 1.0, VantageScore 2.0, VantageScore 3.0, and VantageScore 4.0.
TIME Stamp: All your credit scores matter
Your FICO Score 8 is just one measure of your overall credit health, although it may be one of the most widely used scores overall. Even so, the steps to improve your credit are mostly the same regardless of the credit score being used.
Pay all your bills early or on time with no exceptions, keep debt levels at a minimum, don't open too many accounts at once, and refrain from closing old accounts if you don't have to. Rinse and repeat, and your credit score will eventually take care of itself.
Frequently asked questions (FAQs)
Is it good to have a FICO score of 8?
FICO Score 8 is a type of credit score, but your score will never be 8 because this scoring model assigns scores between 300 and 850.
What does a FICO Score 8 mean?
FICO Score 8 is a type of FICO score that is one of the most commonly used.
What is a good FICO 8 Score to buy a house?
Most lenders want to see a credit score of at least 620 when applicants apply for a conventional mortgage. However, mortgage lenders are most likely to use one of the FICO scoring models used for their industry when you apply, including FICO Score 2, FICO Score 5, or FICO Score 4.
Which is better: FICO score 8 or 9?
FICO Score 9 is slightly more forgiving than FICO Score 8 since paid-off debt in collections no longer factor in, medical debts are treated differently, and consumers get more help with their credit when their rent payments are reported to the credit bureaus.
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