In addition to your regular creditworthiness, the credit rating company FICO has created another possibility to make you more attractive to lenders.
This new score, known as the FICO Resilience Index, can help people with low traditional credit scores. While your traditional FICO score is designed to predict the likelihood that you will be three months overdue or worse if you are in debt, the resilience score is especially suitable for the pandemic economy.
“The resilience index is designed to predict how well you will manage the economic environment,” said John Ulzheimer, a former employee of FICO and Equifax.
What is the FICO Resilience Index Score?
In order for you to be assigned a FICO Resilience Index Score, your credit profile must have at least one open account that has been reported to one of the credit bureaus in the past six months. Low credit consumers, fewer credit accounts, and low credit relative to credit limits indicate a low risk of missing payments. In other words, they are financially resilient, says Ulzheimer.
The FICO Resilience Index was developed to overcome at least some of the credit restrictions that could prevent an economic recovery. The score is between 1 and 99, with 1 to 44 the most resilient and 70 to 99 the least resilient. The most resilient scorers have the greatest experience in credit management, have lower balances, less active accounts and the lowest number of credit requests in the last year.
The FICO values range from 300 (lowest) to 850 (highest score). This could confuse consumers if the FICO score prefers the highest number and a good FICO resilience index is the lowest number. They are opposites.
According to Datar Sahi, marketing director at Credit Reporting Services, a credit bureau, the new resilience index will be used in conjunction with FICO scores and other information about the borrower to measure their risk during an economic downturn.
“The standard FICO score measures the risk associated with lending to a person without taking into account the economic situation,” says Sahi.
Lenders who use the resilience index score will have a higher level of trust to lend to consumers with a below-average FICO score, he says. In essence, this new tool can serve as a tiebreaker when the borrower is about to qualify but isn’t quite there. The more information is available, the better, says Sahi.
FICO says it will report resilience scores to lenders who are already using their credit scores. That can change in the future.
Will lenders jump on this new train?
Both Sahi and Ulzheimer agree that it will take some time before the resilience score becomes established. Lenders are slow to adopt new methods to qualify their borrowers.
“They don’t want to bother to evaluate and apply a new score to their business because it may be a new risk,” said Sahi.
Ulzheimer points out that FICO 9 has been available for almost six years, but lenders are still making extensive use of the FICO 8 generation introduced in 2009. They have to research and evaluate new tools before they actually implement them, he says. You will wonder how this affects your bottom line and your decision making.
If you find enough benefits to use the FICO Resilience Index scores, some rejections in approvals can change, but some acceptations can also result in rejections.
What is your FICO Resilience Index?
Although your FICO score is free for you from various sources, including many credit unions, this does not apply to your FICO Resilience Index Score. It will cost you.
According to a FICO spokesman for Porter Novelli Public Relations, you must either subscribe to FICO Advanced ($ 29.95 per month) or FICO Premier ($ 39.95 per month) on MyFICO.com to access your resilience index. Those who have had their subscription since before March of this year can view their FICO Resilience Index in the “Member Center” dashboard.
Newer subscribers will get their score the next time the credit report is updated. The Advanced option is updated every three months, while the Premier selection is updated every month. This update can also be edited by the subscriber, which is a feature of the subscriptions.
This article originally appeared on www.thepennyhoarder.com