FICO® Score 10 Suite – Will New Credit Rating Changes Affect Your Credit Score?

Lamine Zarrad
September 13, 2022

The latest FICO® scores give better insight into how consumers manage debt. Here’s how to protect your credit score.

Whether you’re applying for a new credit card, a car loan, or a home mortgage, it pays to have a strong credit score. While there are numerous credit scores on the market, the FICO® Score is the undisputed king. 

An estimated 90% of top lenders use FICO® Scores to evaluate borrower risk. This means when FICO® updates its scoring model – it’s wise to pay attention. But in all the chaos of the past few years, you’d be forgiven if you missed the big news in 2020. FICO® 10 and FICO® 10T mark the biggest update to FICO’s scoring methodology in nearly a decade. Notably, FICO® 10T uses “trended data” to give better insight into how consumers manage debt over time. 

While many lending institutions are still using older models like FICO® 8, it’s only a matter of time before a lender pulls your FICO®10 or FICO®10T. Understand the changes to make sure they like what they see. 

(Need a crash course on the many FICO® scores YOU might have? Read this first.)

How is the FICO® Score 10 Suite different from earlier models?

If older models provide a snapshot of your credit habits, the FICO®10 Score Suite brings out the entire photo album. According to FICO, the latest models are the most comprehensive yet for evaluating borrower risk – and could help lenders cut defaults by 9% to 17%. 

1. Trended Data

The key feature of FICO® 10T is its use of “trended data.” This means it takes into consideration your debt management patterns over the previous 24 months, including how you’ve used and repaid credit accounts.

This methodology scores whether you’re reducing, maintaining, or increasing your debt levels over time. This helps determine whether you’re a transactor - meaning you pay off your full balance every month - or a revolver, who carries a balance month-to-month. 

Here’s why this matters: many folks pay down their debts before applying for new credit. With earlier scoring models, this could give your score a quick boost and improve your approval odds. Since FICO® 10T considers your historic “trends”- not just your balances at the time the score was pulled - this strategy could have less of an effect on your credit score. 

Key Takeaway: To make trended data work in your favor, do your best to pay off (or at least pay down) your balances each month – far in advance of applying for new credit. 

2. Personal Loans & Credit Debt

It’s generally considered a smart move to consolidate credit card debt with a personal loan. This is because personal loans usually have lower interest rates than credit cards, which makes it easier to pay down debt. It can also help improve “credit mix,” an important factor in your credit score. 

Unfortunately, this strategy can backfire if you’re not careful. Say you’ve maxed out a credit card at $5000. You could transfer this balance to a low-interest personal loan to reduce your monthly payments. But if you max out your card again, you’ll rack up even more debt than you would have otherwise. 

With the new FICO® 10 updates, your wallet doesn’t just suffer in this scenario – your credit score could, too. Reports suggest the new models track whether you run back up a balance after taking out a personal loan for credit debt – and consider it high-risk activity. 

Key Takeaway: Consolidating debt with a personal loan can still benefit your credit score (and financial situation) but only if you take control of your spending habits and keep your balances low.

3. Delinquencies & Late Payments

One of the most important parts of responsible credit use? Always pay your bills on time. Your repayment history is a critical factor in your credit score, regardless of the scoring model. 

Delinquencies generally show up on your credit report once your bill is 30+ days overdue (though you can get hit with penalty fees if you’re as little as one day late). Late payments carry less weight over time, but can still affect your credit score for years. 

Research suggests the FICO® 10 Score Suite weighs delinquencies even more substantially than previous models. In short, if you pay late, your score could take a bigger hit, and take longer to recover. 

Key Takeaway: It’s more important than ever to stay on top of your bills – no exceptions. 

4. Credit Utilization

“Credit utilization” compares your credit account balances to your overall credit limit (the maximum amount you can spend). While credit utilization has always played a role in credit scoring, it will have a greater impact in FICO® 10

As a rule of thumb, try to keep credit utilization below 30%. If you have a $10,000 credit limit, for example, aim to keep your balance below $3000 at all times. Since the new scoring models consider historic data, running a high balance for even just a few months could have lingering effects. 

Key Takeaway: Always keep your balance below 30% of your total credit limit - even if you pay your card off each month - to show you are spending well within your budget. 

How to use FICO® 10 to your advantage

Compared to earlier scoring models, the FICO® 10 Score Suite provides greater insight into consumer borrowing patterns. But protecting your credit score remains the same – simply use credit wisely (with a few small tweaks).

  • Manage Balances: Pay off or keep your balances low from month to month. Work to consistently reduce your total debt, rather than paying it off all at once before applying for new credit. 
  • Set Safeguards: It’s more important than ever to never miss a payment. Put your bills on autopay, even if it’s just to make sure you pay at least your monthly minimum. 
  • Consolidate Wisely: Break overspending habits before consolidating credit debt with a personal loan – and avoid running up new balances on the cards you just paid off. 
  • Use Credit-Building Tools: Enhance your credit history with innovative tools like StellarFi, which turn your monthly expenses into credit builders. 

The bills you pay should pay you back 

With StellarFi, you can build credit with the bills you pay each month already. Simply sign up and link monthly payments like your rent, cell phone bill, and even your Netflix subscription. 

StellarFi reports your positive repayment history to all three major credit bureaus, impacting 100% of the factors that make up your credit score – including those that influence the FICO® 10 Score T.

Signing up only takes a minute, and there’s no credit check. Take a look around and join StellarFi today.  

The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.

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On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. StellarFinance, Inc. will report your on-time payments to Experian®, Equifax®, TransUnion®, and Innovis®. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.