Americans who are struggling to pay off their debt could see lower FICO credit scores in their future, especially if they miss payments.
Fair Isaac Corp., the company behind the popular FICO credit score, announced the launch of its latest FICO 10 model today, Jan. 23, that will start incorporating consumers’ debt levels into their scoring model.
This comes as total household debt in the U.S. has steadily increased for about two years, and currently sits at about $13.95 trillion as of last September 2019, according to the Federal Reserve Bank of New York. That’s higher than the previous high of $12.68 trillion seen right before the 2008 financial crisis.
“This was bound to happen,” John Ulzheimer, an expert on credit scores and credit scoring, tells CNBC Make It. “The job of scoring models is to properly assess risk, not simply give people better scores as a default position.”
FICO estimates that about 110 million consumers will see a change of less than 20 points to their score under the new credit score model. Overall, roughly 80 million consumers will see a change in score of 20 or more points in either direction, upward or downward, FICO says.
View the full article on the FICO credit score changes