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Changes to How the FICO Score Is Calculated

Changes are coming in the way your FICO score is calculated. Here’s what you can do now to make them good changes.

Your FICO score holds the key to your financial future. A strong score gives you access to higher credit limits, lower interest rates, lower insurance rates, better mortgage rates and terms, and much more.

The way in which your FICO score is calculated is about to change. When does the FICO score update? In July 2020. Here’s what you need to know:

What is the FICO score?


FICO scores are a type of credit score developed by the Fair Isaac Corporation; like all credit scores, they measure your credit risk to a potential lender. FICO scores range from 300 (low) to 850 (high). In mid-2019, the average FICO score was 706.

Don’t know your credit score? It’s easy to find out—many websites and credit card companies allow you to monitor your credit score at no cost via an online account or app. Simply sign up for an account and provide information like your name, social security number, and date of birth to get started. Just make sure you are comfortable with the information sharing policies of the company you choose.

You can also download a free credit report once per year at is Federally authorized and does not share your personal information with advertisers. This report will not give you your credit score, but it provides valuable information about your credit history that can help you fix your credit score.

A common misconception is that checking your credit score can hurt it. That’s simply not true—checking your credit score is penalty-free.


When Does the FICO Score Update? What You Need to Know

How is the FICO score changing?


Historically, your FICO score was based on how much you owed and your payment history over time. The FICO score model took snapshots of your payment history and debt levels; these snapshots were more heavily weighted on recent transactions. The new FICO score model will consider your financial data over a two-year period. In addition, FICO scores will pay closer attention to your use of personal loans.

Why is the FICO score changing?


Credit card debt is soaring, and an increasing number of people have begun using personal loans to consolidate their more expensive credit card debt. While it makes sense for some people to do this, a growing number of people are allowing their credit card debt to build back up again, leaving them with both credit card and personal loan debt. Lenders are also recognizing the need to take a more comprehensive look at the way in which you use debt over time, not just in snapshots. Enter: a new way to calculate the FICO score.

Why is the FICO score changing?

Who will be affected and how?


Virtually everyone will be impacted by the FICO score update. About 60 percent of us will see a change of less than 20 points, while the remaining 40 percent will see an increase or decrease of more than 20 points. Of those with a change of more than 20 points, about half will see an increase and the other half will see their FICO score drop.

The New FICO Score Method Will:

Reward you if…

you keep credit card balances low, make your payments on time and regularly make more than the minimum payment to reduce your overall debt.

Penalize you if…

you move or consolidate your credit card debt using a personal loan, and then allow your credit card balances to build again.

What should you do to protect your FICO score?


Don’t panic but be proactive. Take these simple steps now to improve your FICO score.

  • Monitor your credit report, and correct errors if you find them
  • Pay your bills on time
  • Reduce your credit card debt
  • Avoid taking personal loans

Most experts encourage people to keep their credit utilization ratio (the amount of credit you’re using divided by the total allowable credit available to you) at less than 30 percent. Take a few moments now to calculate your ratio, then set a plan to move it as close to 10 percent as possible.

It’s Not Too Late to Fix Your FICO Score


These changes take effect when the FICO score updates in July 2020 but not every lender will implement the new scoring right away, so do whatever you can now to reduce your debt and fix bad credit. And because the new model looks at the past 24 months, the efforts you make now will be noticed when the new formula goes into effect.

When Does the FICO Score Update? What You Need to Know

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