Your score is most likely to drop when using the FICO 10 scoring models if: You took out a personal loan to consolidate credit card bills, but now your card balances are up again or it appears you have applied for additional credit.
Delinquencies Will Hurt Scores More Under FICO® 10
Late payments on your credit reports can lead to lower credit scores for many years, regardless of the scoring model or generation of credit score. With the FICO® Score 10 Suite, the impact of late payments is more pronounced than with prior FICO® Score versions.
FICO 10 and 10T scores can be used by lenders to assess credit risk when a person applies for credit cards, car loans, personal loans, and mortgages.
In late 2022, the Federal Housing Finance Agency announced that it would replace the Classic FICO credit model, which Fannie Mae and Freddie Mac have relied on for nearly 20 years, with the FICO 10 T and VantageScore 4.0, a competing model that also incorporates trended credit bureau data.
Additionally, FICO® Scores are based on credit report data from a particular consumer reporting agency, so differences in your credit reports between credit reporting agencies may create differences in your FICO® Scores.
This is because Credit Karma makes use of another credit scoring model compared to many lenders and possibly does not have access to all the data required to calculate your credit score. Furthermore, credit ratings from various sources can differ due to dissimilarities in the data used for their computation.
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.
The most widely used model is FICO 8, though the company has also created FICO 9 and FICO 10 Suite, which consists of FICO 10 and FICO 10T. There are also older versions of the score that are still used in specific lending scenarios, such as for mortgages and car loans.
The FICO credit-scoring model has been updated over the years, resulting in multiple versions of the score. FICO Score 8 is the most commonly used. But the version may vary by lender and credit product, like applying for a credit card versus financing a car.
The FICO 10 scoring model is slated for a summer release and could cause your credit score to drop 20 points as the model looks at past debt and balances. If you've been carrying credit card debt, you could see a drop in your credit score soon.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
Most of the credit scores that lenders use in the United States, including most versions of the FICO Score, range from 300 to 850. Therefore, most financial professionals generally accept that 300 is the lowest credit score a consumer can have.
Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.
Average FICO® Score in the U.S. Climbs to 715
Despite the slight increase over the past 12 months, average FICO® Scores have meandered throughout 2023, with average scores increasing from 714 to 716 this past summer, before settling at 715 at the end of the Q3 2023.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2022, the average FICO® Score☉ in the U.S. reached 714.
The average credit score in the US is a 718 FICO score and 701 VantageScore. Gen Z (18-25) has the lowest average credit score at 680, while the Silent Generation (77+) has the highest at 760.
The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of mortgage. For an FHA loan, a popular choice among first-time homebuyers for its lower down payment requirement, the minimum credit score is usually around 580.
Eligibility requirements: Usually, you'll need a good credit score (a FICO score of 670 or higher) to qualify for a $350K mortgage, especially if you want the best rates. Lenders may also require proof of income and other assets.
Different types of mortgages also have different minimum credit score requirements. And that can be a barrier to an uber-low down payment if your score is low. However, the minimum down payment for a $400K house would be only $2,000 more for those with a score of 580 instead of 620.
Your Credit Karma score should be the same or close to your FICO score, which is what any prospective lender will probably check. The range of your credit score (such as "good" or "very good") is more important than the precise number, which will vary by source and edge up or down often.
While FICO® uses the same general factors to calculate FICO® Scores, a FICO® Score 8 may differ from a FICO® Score 9 because various details of your credit report, like paid versus unpaid collections accounts, are weighted differently.
FICO 8 scores range between 300 and 850. A FICO score of at least 700 is considered a good score. There are also industry-specific versions of credit scores that businesses use. For example, the FICO Bankcard Score 8 is the most widely used score when you apply for a new credit card or a credit-limit increase.
You can quickly increase your credit score by 40 points by reducing your utilization, disputing errors on your credit report, adding on-time rent or utility bills to your reports, and keeping up with your current payments. It is possible to improve your credit score in one to two months.