A Guide to Credit Scoring Models

Your credit score can impact the interest rate you’re offered on a mortgage or car loan, among other areas of your life. Making matters more complicated, though, is the fact that lenders use different scoring models to evaluate your creditworthiness. Here’s a look at how these scoring models vary. Year Versions Scoring models have evolved over time based on consumer behavior. “Going through the mortgage crisis and the economic downturn … Americans’ saving habits changed, and the way they use credit cards changed,” says Rod Griffin, director of public education at the credit bureau Experian. “As people change, scoring models change in order to continue to accurately reflect risk.” Different scoring models weigh certain factors more heavily than others. FICO scores are used in 90 percent of lending decisions in the U.S., according to its website. The majority of those lenders use FICO 8, says Anthony Sprauve, senior consumer credit specialist at Fair Isaac Corporation, but some use previous versions. “Just as there are people who are on Windows XP or previous versions of Windows, there are people who for any number of reasons have chosen not to update,” he explains. FICO recently introduced FICO 9, which will be released to lenders early this year. One notable tweak to FICO 9 is the way it views medical debt that has gone into collections. “It will not penalize that as severely as it did prior,” Sprauve says. “A lot of people find themselves with medical debt that's gone into collections without even knowing they owe the debt due to miscommunication between a provider and insurance companies.”