How to Get a Small Business Loan in 2024

Credit scoring models evolve over time, creating a more accurate prediction of your credit behavior with every new update. The FICO^® Score 10 and FICO^® Score 10T, known as the FICO^® Score 10 Suite, are the latest credit scoring models from the Fair Issac Corporation (FICO). Introduced in 2020 and expected to be more commonly used in the future, the FICO^® Score 10 Suite includes some of the biggest changes the popular credit scoring model has seen in years.

Here’s everything you need to know about the latest FICO^® Score update and what it means for you.

What's a FICO^® Score?

Your FICO^® Score is a particular brand of credit score developed and calculated by the Fair Isaac Corporation (FICO). FICO is one of the credit scoring models commonly used by lenders to predict credit behavior and estimate credit risk, such as how likely you are to repay a loan on time based on information collected. Scores range from 300-800 or 250-900, depending on the specific FICO scoring model used.

While each FICO^® Score model calculates scores somewhat differently, generally FICO pulls credit information from the three main credit bureaus (Experian, TransUnion, and Equifax) and cites five key factors that influence how all scores are calculated. These five factors, or behaviors, are your:

Payment history
Total credit used (amount of debt owed)
Length of credit history
New credit accounts
Mix of credit types

Since FICO pulls information from all three bureaus, you’ll have three different credit scores, which may vary somewhat, as not all bureaus report information in the same way. Your credit score will also change frequently, and sometimes even daily as new information in your credit reports become available.

What’s different about the FICO^® Score 10 Suite?

The FICO^® Score 10 Suite is the newest update to the FICO credit scoring model and is comprised of two scores: FICO^® Score 10 and FICO^® Score 10T. Designed to be the most predictive and comprehensive credit score model developed by the company to date, the FICO^® 10 Suite allows lenders who use it to make better decisions when measuring credit risk. With the FICO^® Score 10 Suite, your credit score is still determined by the five key factors mentioned above and you’ll still be graded on the same three-digit scale, however, the new model has made two important changes.

FICO^® Score 10

FICO^® Score 10 changes the weight of factors in your credit file. Late payments and credit utilization may have a greater impact on your score than in the past. However, FICO 10 is similar to previous FICO versions—lenders who use the base FICO 10 model see a snapshot of your credit profile based on those key factors.

FICO^® Score 10T

FICO^® Score 10T uses a powerful new set of predictive characteristics generated from both traditional and “trended” credit bureau data. Instead of providing a simple snapshot of your credit reports, FICO^® Score 10T shows lenders how your financial health evolves over time. FICO^® Score 10T looks at your credit balances, payments made, and credit debt over the past 24-plus months, versus simply giving you a score based on a monthly reported balance.

What does the FICO^® Score update mean for you?

FICO^® Score 10T adapted trending data as a way for lenders to determine if you’re moving toward financial health, away from it, or largely staying the same. By looking at a full 24-plus months of data, in theory, lenders can better predict recent trends to see how you may repay in the future.

The change in the way data is presented also means some actions may impact your score more under the new model. If you’re steadily paying down your debt balances (or you pay in full every month) your FICO^®Score may improve. However, taking on a lot of debt or letting large debts revolve over several months may hurt your credit score more under the FICO^® Score update. It will also be even more important to pay your bills on time each month and keep your accounts current. Under FICO^® Score 10, missed payments will have a bigger impact on your score.

If you’re planning to apply for new credit or take out a loan soon, keep in mind that not all lenders will use FICO^® Score 10 or FICO^® Score 10T. Adopting an updated credit scoring model can be costly and time-consuming for lenders. Since FICO keeps older versions active, many simply opt to stick with what the model they’re currently using. The new FICO^® Score 10 Suite does not replace older FICO credit scoring models such as FICO 2, 4, 5, 8, or 9. Many lenders may still be using older models in making credit approval decisions.

What’s my credit score?

While credit reports do not usually include your credit score, you can get a free copy of your credit report every 12 months from each of the three nationwide credit bureaus (Experian, Transunion, and Equifax). Through December 2023, you can also get a free copy of your credit report each week at AnnualCreditReport.com.

In the past, to get your actual credit score you typically had to pay a credit score service. However, recently many major credit card companies (and some banks and auto loan companies) have begun providing credit scores for their customers on a monthly basis, free of charge. Experian now includes your credit score for free on reports they mail to you.

If you decide to pay a fee to see your credit score, check several free sources to understand your potential range of credit scores. But keep in mind these scores may be different than the score your lender ends up using.

The bottom line

The latest FICO^® Score update, FICO^® Score 10 and FICO^® Score 10T are designed to outperform all previous FICO scoring models, helping lenders to better evaluate consumers’ credit risk. Whatever scoring model your lender uses to make lending decisions, similar factors determine whether you have excellent, good, fair, or poor credit. By borrowing only what you need, taking control of your debt, and paying your bills on time, you’re on your way to a great credit score, no matter the scoring model.