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NEWS: FICO Resilience Index Credit Score Launched - What is this new FICO score? Should you care?

hey I'm Jessica from padma.com FICO out

with another credit score it's true it's

called the FICO resilience index and

we're to talk about in this video but

before we do I'm gonna ask you to please

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I thank you for doing so

so FICO is out with another scoring

model scoring tweak it is sort of an

add-on to the regular FICO score is

called the FICO resilience index and the

purpose of this FICO resilience index is

to try to give lenders a better

understanding of who is better able and

who is worse able to withstand an

economic downturn such as we are having

right now in other words when times are

good one 685 accredit score for example

is not the same as another 685 credit

score the standard FICO model assumes

that things are going to sort of keep on

going the way they are meaning you're

not going to lose your job and you're

gonna continue to pay your bills in the

same way that you have and continue to

do everything else in the same way that

you have the FICO resilience index looks

at it a little different and says here

are some of the factors that we know

change when there is an economic

downturn and we see that change in

certain people we know that maybe it's

hitting them harder and when we don't

see that change in other people we know

that they are more resilient so like I

said the FICO resilience index is sort

of an add-on to the regular FICO score

it is not a whole different scoring

model that lenders would use alone and

it is a different scoring range as well

so it actually has a point total or

however you want to think of it from 1

to 99 and a lower score is better than a

higher score so if you have a lower

score you are considered to be more

resilience and if you have a very high

score you are considered to be very

sensitive to changes in the economic

outlook for the world in general so it's

kind of weird that they did it this way

because you know if you for your regular

FICO score higher is better but for your

resilience index lower is actually what

you want to have so it'll be interesting

to see

lenders feel about that you know they're

gonna be thinking I want hive in here

and I want lo over here

FICO hasn't divulged exactly what goes

into this resilience index and they

definitely haven't said how many points

you would get or not get for various

factors but for everything I've seen

presentations and other readings that I

have been able to get my hands on

they haven't totally reinvented the

wheel here so a lot of the factors that

go into your normal normal FICO score

are going to go into this resilience

index but what is most important and

what has the most weight is a little

different there are four factors that

seem to really count and there are two

in particular it seemed like they count

maybe a little more and they may

surprise you when you think of the

weight that they would have in a regular

FICO score so the first of those is your

credit mix so credit mix is whether you

have different types of credit revolving

credit and installment loans if you have

both of them that is better in the

regular FICO score but even more so in

this resilience index so people that

have only revolving credit meaning

normally credit cards are going to do

worse on the resilience index than

people that have a mix if they have a

mortgage or an auto loan in their credit

history as well now like I said that's

the same in the standard FICO score but

it has a higher weight here so there

obviously is something that shows that

if you only have revolving credit that

means you are a little more susceptible

to having trouble when the economy goes

bad number two is how much debt you have

on revolving accounts so that usually

means credit cards and it does not mean

mortgages auto loans are those kinds of

installment loans so they're looking in

particular at how much revolving debt

you are carrying and it is not credit

utilization which is something that

comes into play in your regular FICO

score as far as I can tell this is about

the solid number like $5,000 is worse

than $1000 regardless of how much

available credit you have so in the

regular FICO score you can have a decent

amount of debt and not have it hurt you

if you have a lot of available credit

because it is a percentage of the

available credit you are using in this

case the more you have in debt the worse

it looks which makes sense because if

there's a Nikken

McGowen turn and all of a sudden you

know you're having trouble paying your

bills obviously if you have more debt

you're gonna be in more trouble than

someone that has less debt regardless of

how much available credit you have

number three is the number of active

revolving accounts you have number four

is the number of new accounts that you

have opened in the last twelve months

now with that active revolving account

piece they're in number three you can

see again that they are focusing it

seems very much on credit cards so if

you are using a lot of credit cards and

you have a good amount of debt on them

that obviously is hurting you in this

resilience index it obviously has been

shown that people that do those things

are the ones that are most likely to

have trouble when the economy goes bad

now you might notice that I didn't say

anything about on-time payments and

on-time payments is the most important

factor in your regular FICO credit score

so wouldn't that be an important piece

to this and the answer is no and if you

think that is stupid I should tell you

that

FICO actually went back to the

statistics that they have from the 2008

2009 Great Recession and tried to look

at similar types of customers similar

credit scores and that sort of thing and

say why did this person default and this

person didn't default an on-time

payments was not a crucial factor so if

they had you know the same history of

on-time payments that wasn't the thing

that came into play it was that credit

mix or it was the amount of debt they

had and the other factors that I talked

about so they are using the information

from the past economic downturn to try

to predict this economic downturn and of

course any future economic downturns so

whether these resilience index scores

are ever going to matter to you is going

to depend on whether lenders adopt them

or not and the way FICO is trying to get

lenders to adopt them is they are

actually letting the credit reporting

agencies Experian Equifax and probably

soon TransUnion all though TransUnion is

not in there yet they're letting them

use it for free so they can give it to

their lenders as an extra layer on top

of the FICO score but nobody has to pay

for it so FICO is just giving it out

there for free at least in the short

term to try to get it established now if

the lenders like it and they start using

it well then

they will probably want the credit

reporting agencies to keep giving it to

them at some point that's when the money

aspect comes into it now for you if you

wanted to know your resilience index

right now I believe you can get it via

Equifax or via fight goes my FICO site I

haven't actually used them myself to see

but I have heard other people mentioned

that they have seen their resilience

index scores through those two sources

now if lenders do start to use these

FICO resilience index scores what that

could mean for you is that if you have a

very good resilience index score you

potentially could be approved for a loan

or credit card that maybe your credit

score alone would not suggest that you

would be approved for or if your

resilience score is bad you might have a

credit score that would make you think

you would get approved and then you

wouldn't so that is kind of how that is

going to work for some people and FICO

is sort of argument behind this is that

normally what banks and other lenders do

is when there's an economic downturn

they just say okay let's increase the

credit scores that it takes to get

approved and we'll just do that across

the board if it used to take a six sixty

let's make it go up to seven hundred and

FICO is saying well you don't need to do

that because with this resilience score

you can look at that person at 660 who

you used to approve and say well if

their resilience score is good we'll

continue to approve them if their

resilience score is bad we won't approve

them anymore and so that would allow the

banks to still continue to lend more and

do well and become more profitable as

they all want to do without just taking

a very blunt approach and increasing the

credit scores that is required to get a

particular loan or credit card now most

of the materials that FICO has provided

so far talking about the resilience

index they keep talking about people who

are sort of in the credit score range of

maybe 640 to 700 and those are the

people that oftentimes are on the bubble

when it comes to approval for various

loans and credit cards so it makes sense

that that is probably who they are

targeting the most so if you have a

credit score that is much higher you're

probably not gonna have to worry about

the resilience index you'll still get

approved for whatever and if your credit

score is significantly little

lower than you know that's 640 area well

then you're probably not gonna get

dragged up into approvals if you weren't

getting them before but if you're in

that middle place you're kind of on that

bubble if your resilience index is good

that obviously is going to help you now

with all that information there's

probably not a whole lot you should be

doing with it at this point you know

going out and getting an installment

loan so that you can have a better

credit mix so you can have a better

resilience index doesn't make a whole

lot of sense reducing your debt is

always a good idea so there's certainly

nothing wrong with that or making sure

you don't open too many

new accounts that also is something that

makes sense

anytime so this resilience index may

come into play for some people but it's

not anything that I would suggest means

that you should change what you're

already doing if you're trying to

improve your credit score overall I

think FICO is resilience index is a

pretty interesting thing and it makes a

lot of sense but whether lenders will

really use it very often I think is the

big question because most of the time if

a lender is looking at someone on the

bubble unless that person had a very

extreme resilience index score very bad

or very good it probably wouldn't come

into play so if someone was already on

the bubble and then they had sort of a

mediocre resilience index score well

then that's what make a whole lot of

difference in terms of that application

being approved or not so it'll be

interesting to see if lenders like it

and if they actually find themselves

using it because like I said FICO is

giving it for free for now who's going

to be willing to pay for it later if

they feel like they're already getting

what they need from the standard FICO

score so that's it for this video thank

you for watching in as always please go

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