Credit is one of the most important parts of your home loan application. When applying…
FICO is changing its scoring algorithm in 2020. Here’s what that means for you.
If you listen to the news, you might hear reports that your credit score is going up in 2020 because FICO’s scoring algorithm is being changed. Is that true, though? Maybe, maybe not.
You may not know this, but there are 21 different TransUnion credit scores and 16 different Equifax scores. Why? They use different algorithms for different industries. Also, they keep adding more scores because these scores are industry-specific based on your credit behavior (i.e., whether you’ll do well in a particular industry).
Why would your online credit score be different than what shows up when you get a home loan? There are a couple of reasons.
First, there are many different versions of FICO. Your lender could be using FICO 2, FICO 4, FICO 5, or FICO 8 (which a lot of lenders use). Now in 2020, FICO 10 is the latest version being released, and it’s being reported on the news that people’s credit scores will go up because they’re changing the way credit is being scored.
The problem, though, is that unless your industry and specific report is pulled from FICO 10, your score isn’t going anywhere. Collectively, you have a residential mortgage credit report (RMCR), but TransUnion, Equifax, and Experian use different scoring algorithms to score your RMCR.
If you have more questions about this topic, don’t hesitate to reach out to us. We’d love to help you.