FICO 5 Vs. FICO 8: How do Lenders Use New FICO® Scores?

FICO 5 Vs. FICO 8.  What are the differences?. Ever since FICO® Scores was introduced to lenders years ago, they have become the best-known and most widely used credit score. However, some things have changed since lenders first started using FICO scores in 1989. Lender credit-granting requirements, data reporting practices, consumer demand for credit as well as consumer use of credit have all evolved over time.

FICO 5 Vs. FICO 8: How do Lenders Use New FICO® Scores?

FICO 5 Vs. FICO 8. In order to help lenders make more informed credit-granting decisions, and to help ensure that consumers get access to the credit they need, the FICO® Score model has been updated periodically over the years. FICO scores have been updated to reflect the evolving change in behavior in the usage of credit. So apart from the most widely used version of FICO score 8, there is FICO 5 and other FICO versions. However, in this article, we will be comparing the FICO score 8 and the FICO score 5 to see how they differ from each other.

How do Lenders Use New FICO® Scores?

When a new FICO® Score version is developed, it is released into the market.

From there, each lender determines if and when they will upgrade to the latest version. Some lenders are quick to make the upgrade, while others take a little longer. This explains why some lenders are currently using different versions of the FICO® Score. For instance, FICO Score 5 at Equifax is the FICO score version previous to FICO score 8 at Equifax.

Other FICO® Score versions, including industry-specific. Auto and bankcard versions, are also included in the. FICO score products on myFICO.com to enable see what most lenders see when looking at your scores.

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Irrespective of the FICO® Score version, the keys to obtaining. Favorable FICO scores are the same. They are:

The FICO 5 Vs. FICO 8

FICO Score 5

This, FICO score 5 is one alternative to FICO 08. Which is prevalent in auto lending, credit cards, and mortgages. Most importantly, FICO Score 5 is widely represented in the mortgage industry. The information contained in a borrower’s. FICO 5, comes exclusively from the credit reporting agency. Equifax. Information from Experian composes FICO score 2. While TransUnion (NYSE: TRU), goes with FICO score 4. In comparison, FICO 8 uses information from all three credit reporting agencies.

One reason a mortgage provider. Especially a bank, would depend on FICO 5 or FICO 4 instead of FICO 8 (or even the new FICO 9) is. Because earlier versions are less forgiving of unpaid collection accounts. Most especially medical accounts. Mortgages are very large loans. And mortgage lenders tend to tread more carefully.

FICO Score 8

FICO score 8 version is a system that is consistent with previous versions. However, there are several unique features that make. FICO 08 a more predictive score, than the previous versions. FICO score 8 was introduced in 2009.

Like all the previous FICO score systems. FICO 08 tries to convey how responsibly and effectively an individual. The borrower interacts with debt. Scores tend to be higher for consumers who pay their bills on time. Keep low credit card balances, and only open new accounts for targeted purchases.

Conversely, lower scores are linked to those who are frequently. Delinquent over-leveraged. Or frivolous in their credit decisions. It also completely overlooks collection accounts in which the. Original balance is less than $100.

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The additions to FICO score 8 include increased sensitivity two highly utilized credit cards – which implies that low credit card balances on active cards have a more positive influence on a borrower’s score. FICO 8 also treats isolated late payments more carefully than the past versions. According to FICO 08, if the late payment is an isolated event and other accounts are in good standing, FICO Score 8 is more lenient.

FICO score 8 also shares consumers into more categories to offer a better statistical representation of risk. The primary aim of this change was to keep borrowers with little to no credit history from being graded on the same level as those with robust credit histories.

Which FICO® Score Version is Important to Me?

Consider these guides:

For financing a new car:

It is best to know your FICO® Auto Score, the industry-specific scores used in the majority of auto financing-related credit evaluations.

Applying for a credit card:

You should likely get to know your FICO® Bankard Scores or FICO score 8, the score versions that are being used by most credit card issuers.

Purchasing a home or refinancing an existing mortgage?

You’ll likely want to know the base FICO® Score versions which are previous to FICO score 8, as these are the scores that are used in the majority of mortgage-related credit evaluations.

For other types of credit, like personal loans, student loans, and retail credit, you’ll likely want to know your FICO® Score 8, which happens to be the score most widely used by lenders.

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