What You Need To Know About FICO 10 T

On January 23rd, FICO introduced their newest scoring model for lender. The FICO 10 T scoring platform created a lot of scary headlines.

“FICO credit score changes could punish people who struggle to manage debts” - Washington Post

“New FICO Score 10 Suite may impact your credit score” - Bankrate

“What the new FICO credit score reveals about the precarious state of Americans’ finances” - MarketWatch

Initially, I was taken back at the perception that FICO was reversing their recent trend of creating scoring models that were more inclusive and relevant in today’s market. The idea that a more strict scoring model, specifically one that punished consumers with unsecured personal loans, seemed backwards to me.

After hours of research it dawned on me why lenders and banks are so excited about this new suite of scoring models.

#1. FICO 10 T and FICO 10 Suite doesn’t require any change in how current underwriting systems operate. The model was built using the same reason codes as the existing FICO scoring models and has “backward compatibility to previous FICO Score versions”. This makes the barrier to entry much smaller for all industries.

#2. They put a focus on “predictive power” by using Trended Credit Bureau Data. This can be compared to the machine learning technology that the VantageScore 4.0 utilizes and gives greater insight into consumer habits.

#3. They make some serious claims. To be specific, they claim that the FICO 10 Suite can reduce defaults on newly originated mortgage loans by 17%… Sheesh.

There has been limited information on how the FHFA will approach FICO 10 Suite or FICO 10 T but I assume a scoring model that doesn’t require a complete gutting of underwriting systems will be very favorable compared to some of the other scoring platforms available on the market from companies like VantageScore and FICO.

Want to learn more? Here are the resources that I used.

https://fico.gcs-web.com/news-releases/news-release-details/fico-introduces-new-fico-score-10-suite

https://www.marketwatch.com/story/what-the-fico-credit-score-changes-reveal-about-the-precarious-state-of-americans-finances-2020-01-27

https://www.washingtonpost.com/business/personal-finance/fico-credit-score-changes-could-punish-people-who-struggle-to-manage-debts/2020/01/24/11b7ceaa-3dfd-11ea-baca-eb7ace0a3455_story.html

https://www.bankrate.com/finance/credit-cards/new-fico-score-10-suite-changes-to-credit-score/