Your FICO score may vary depending on what scoring model a financial institution uses. This is because each different scoring model has a unique set of rules and analyzes your credit data differently.

Although FICO Score 9 is the most current version of the FICO score model, many financial institutions still choose to use FICO Score 8 to analyze data and make lending decisions. The main differences are that FICO Score 8 weighs credit card utilization higher than other models and that it may be more forgiving of a one-off late payment than other versions.

What is FICO Score 8?

The Fair Isaac Corporation (FICO) released their first FICO scoring method in 1989. The scoring system has gone through many major reworks, though the results it creates form analyzed data are still relatively the same.

General FICO scores are created on a scale of 300 to 850. These scores are based off the information from your credit report, and the higher the number, the better your chances of getting good terms and interest rates on your credit.

FICO Score 8 is one of the updates to the FICO scoring method. Though it is not the newest version, a large number of financial institutions still use this scoring method to help lenders analyze a person’s creditworthiness.

What goes in to your FICO Score 8 credit scores?

FICO Score 8 credit scores depend heavily on the information that is on your credit reports. This is partially what makes being responsible with credit so important. Even if you are financially stable without credit, not having a good credit score may affect your ability to get car loans, mortgages, and other financial stepping stones.

Most of the credit information on your credit reports is used in some way to determine a piece of your overall creditworthiness. Here are some of the types of information on your credit reports and how they factor in to your FICO Score 8 credit score.

Payment history (35%) – Your payment history is the single most important factor in FICO scores, as it is a direct picture of how you handle credit in real time. A history marked with late payments and charged off accounts may have a negative impact on your scores, where a long history of making payments on time and in full has a great positive impact.

Overall debt owed (30%) – The overall amount of debt you owe helps lenders know how responsible you are with credit, and how likely you are to be responsible with more. This also includes your credit utilization rate, which is how much of your current available credit you actually use.

Age of credit history (15%) – How long you have had credit history will also affect your credit score. A longer history that includes both older and newer accounts may be best, and the scoring model also factors the average age of all your credit accounts.

New credit (10%) – Recently opened accounts and hard inquiries for new lines of credit may also affect your overall credit score, as they may indicate you are in need of more credit or not handling your finances well.

Mix of credit types (10%) – Your FICO Score 8 score will also factor in all the types of credit you have. Having a good mix of different types of credit, such as credit cards, personal loans, auto loans, and mortgages, shows you are able to responsible balance many types of credit. However, this is not as important as other factors

How is FICO Score 8 different from earlier FICO scoring models?

FICO Score 8 scoring model follows many of the key trends of the previous FICO models, with a few key differences:

  • Multiple late payments are scored more harshly – FICO Score 8 punishes a history or pattern of late payments more so than other versions

  • Single late payments are scored easier – With that said, FICO Score 8 is also more lenient on single late payments than previous versions.

  • High credit utilization matters more – FICO Score 8 is more sensitive to high credit utilization, meaning that the higher your credit utilization goes, the more of an impact it may have. Most experts agree the ideal credit card utilization is between 25 and 30%.

  • Very small collections accounts do not matter as much – A collections account with an original balance of $100 or less will not affect your credit score under the FICO Score 8 model.

  • Being an authorized user matters less – Becoming an authorized user on another person’s credit account as a way to boost your credit score is called “piggybacking” in the credit industry. FICO Score 8 drastically reduces the effectiveness of this technique.

How do FICO Score 8 scores compare to VantageScore scores?

VantageScore scoring models are the other popular credit scoring model, and they provide credit scores for over 2,200 financial institutions. While both scoring systems use similar data, they may reach slightly different scores, as they place value in slightly different areas.

With that said, the scoring models are more similar than they are different. For instance, both models place a high importance on overall credit utilization and payment history.

A couple of the main differences between the two come in how they handle collections accounts and tax liens or civil judgments. For example, see how they handle collections accounts:

VantageScore 4.0 on collection accounts:

  • Ignores medical collection accounts less than 6 months old

  • Ignores paid collection accounts

  • Medical collections accounts mean less than other collection accounts

FICO Score 8 on collection accounts:

  • Ignores small collections accounts under $100

  • Treats medical collections accounts like other collections accounts

Additionally, with VantageScore 4.0, a tax lien or civil judgement on your account may be less important than other factors, though they can still have an impact on your scores. However, with FICO Score 8, a tax lien or civil judgement can have a significant impact on your score.

What is the difference between FICO Score 8 and FICO Score 9?

FICO Score 9 is the newest FICO scoring model, and may be more predictive than earlier models, meaning in the long run, it could be a better way to judge credit reports. With that said, change can take time, and many financial institutions feel secure using FICO Score 8.

There are not many glaring differences between the two scoring models, and again, they are more similar than they are different. However, there are some key differences between them.

Here are the key changes FICO Score 9 brings:

Medical collections matter less – FICO Score 9 makes an important distinction between medical collections accounts and other collections accounts. Up until this scoring model, there was not much difference between them, and any collections account had a similar impact on your credit score. FICO Score 9 reduces the importance of medical accounts.

Paid collections matter less – with FICO Score 9, if you paid of a collections account, it will no longer count against you on your credit report. Up until FICO Score 8, paying off a collections account did not immediately help your credit scores.

Rental payments matter more – FICO Score 9 may provide a person with more opportunities to raise their credit, as they now count rental history as a factor of your overall payment history.

Do FICO Score 8 credit scores matter?

FICO Score 8 credit scores may not be the newest version of your FICO scores, but in many ways they still matter just the same. Many financial institutions still choose to use FICO Score 8 as their standard, meaning your score may appear different if you have been checking using the FICO Score 9 model.

For instance, if you are looking to get a car loan, new credit card, or consumer loan, chances are good that the financial institution may use the FICO Score 8 model. This is not true in every case, of course, as lenders are allowed to use whichever scoring model they’d like.

Final thoughts

Anyone shopping around for a new line of credit or loan should get familiar with the credit scoring systems financial institutions are using to analyze their credit report. This can help understand how their overall scores will look in these lender’s eyes.

While there are newer credit scoring models available, FICO Score 8 scoring models are still relevant in many cases. Understanding how FICO Score 8 works can help you know what the financial institutions that use these scores will be looking for on your credit report.

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