What is the FICO Resilience Index?

185
What is the FICO Resilience Index

During these unprecedented times, you should know about the FICO Resilience Index. The world is currently dealing with the COVID-19 pandemic. Countries have implemented lockdowns to control the contagion, but it has caused economic uncertainty never seen before. 

As a result, more people are now exploring credit options that may help their finances. 

What is the New FICO Scoring System?

Financial institutions also have difficulties during this economic downturn. The coronavirus crisis triggered an influx of borrowers, but conventional credit scoring seems inadequate during these unique times. 

These establishments help banks and credit unions determine how creditworthy their borrowers are. They created credit scoring models, which are considered trademarks or registered trademarks of credit bureaus. 

This is why there are other credit scores available, such as the VantageScore. Lenders may freely choose which one meets their needs.

The classic FICO credit scores are currently inadequate for accurately measuring creditworthiness. In response, the Fair Isaac Corporation formulated this new index.

Recently, the new FICO Resilience Index was created to fit these unprecedented times. While credit reports account for the ebbs and flows of economic cycles, COVID-19 is a unique phenomenon. 

This new scoring system supplements the conventional FICO score, and it aims to give lenders assess borrowers during the coronavirus outbreak.

How is the Resilience Index Different from a Credit Score?

The Resilience Index is designed with factors similar to the old FICO rating model. It also considers payment history, credit utilization, age of credit, credit mix, and new credit. 

However, it favors those with fewer credit inquiries and active accounts last year. Those with fewer total revolving balances and greater credit management experience also have an advantage. 

How Is The Resilience Index Different From A Credit Score

More importantly, it compares your past and recent performance during stable and tumultuous economies. It measures your payment history from October 2013 to October 2015 as your “normal condition.”

Meanwhile, it will check how you fared during the Great Recession in October 2007 to October 2009 for your “stressed condition.” Finally, it will compare the normal and stressed conditions in order to get your final FICO Resilience score.

Unlike the classic rating, the FICO Resilience Index range is from 1 to 99. Those with scores from 1 to 44 are considered “more resilient,” and those with 45 to 59 are “moderate.” People who receive 60 to 69 are “sensitive,” while 70 to 99 are “very sensitive.” 

As you can see, the best scores are the lowest since they convey high resilience.

How will it Affect my Credit?

You’re probably worried about how it may affect your access to credit. It may become harder to purchase products and services with credit cards and loans in this economic slump. 

However, the FICO Resilience Index is still undergoing tests. Credit bureaus had to create a new system quickly, so it may change after more lenders test it.

Remember that you still need to maintain a good credit score. It’s crucial to getting the best credit limits and other great terms and conditions. 

It will be vital to adapting to these unpredictable circumstances, regardless of the FICO Resilience Index. They will help you get that extra spending power for your necessities and emergencies.

What is my FICO Resilience Index?

You can check your own FICO score soon once the pilot program gets rolling. Some lenders have just started using it, but rest assured that you’ll see yours soon. 

What Is My FICO Resilience Index

To gain Resilience Index access, you must have no “deceased” indication on your credit report. You must have opened an account that has reported to FICO within the previous six months. 

Bottom Line

Credit institutions use some of your personal information in order to help with their credit decisions. However, they needed more help during the pandemic, so the bureaus created the FICO Resilience Index.

Soon, they may prefer high-resilience consumers who are likely to superbly handle their debts during economic difficulty. 

The index may need more testing and modification before it becomes a standard.

Learn More About FICO Resilience Index

What are the 5 categories that determine your FICO?

The FICO score considers your payment history, credit utilization, age of credit, credit mix, and new credit. The FICO Resilience Index has similar factors, but it accounts for other factors too.

Does anyone have a perfect FICO score?

Yes. Around 1.2% of Americans have the perfect FICO score, according to a 2019 report. FICO reminds people that it is possible to achieve this rating with proper debt management.

What is an excellent FICO score?

The FICO score has a range from 300 to 850, so an excellent rating would be near 850. FICO specifically mentioned people with 740 and above have excellent credit.