Recent updates to the FICO scoring model have changed the way credit scores are calculated – and you may be affected. As of July 2009, the three main credit bureaus (Experian^®, TransUnion^® and Equifax^®) began using an updated scoring model, FICO 08. “It was designed to provide lenders with a more precise system and is expected to improve the accuracy of lending decisions,” says Danny McNeill, Financial Center Manager with Fifth Third Bank.

Below, McNeill outlines the new scoring model’s key differences:

• Small delinquencies are not as heavily penalized. Under FICO 08, debts less than $100 that have gone to collections will no longer damage your credit score.
• Single mistakes carry less weight. If your credit report has a single flaw, such as a missed payment, you will not be penalized as greatly as you had in the past – as long as your report is otherwise unblemished and the mistake occurred two or more years ago. In the past, a single mistake negatively affected your score for up to seven years.
• High balances are more likely to lower your score. Carrying revolving credit balances near your account limits have always hurt your credit score. But under the new system, you will also be penalized for carrying a high balance in general – even if it’s not close to your account limit. Anything over $5,000 is considered high for a revolving credit account.
• It’s more difficult to build credit through “piggybacking.” Under the old system, you could boost your credit by becoming an authorized user on an account owned by someone with better credit. Under FICO 08, better technology will filter out people who have taken advantage of piggybacking, and they will no longer see a score increase from this practice.

Although FICO 08 may cause some people’s credit scores to increase, others may see their scores drop. Not all lenders have adopted the new scoring model, but eventually everyone will be on the new system. While lenders switch over, it’s a good idea to review a copy of your credit report to make sure it’s accurate. You also might consider increasing your credit score by reducing the amount of debt your carry, limiting the number of times you apply for credit and varying the types of credit you have. For additional tips, please read Simple Ways to Boost Your Credit Score.

Fifth Third Bank financial professionals are available to answer your questions about credit and the FICO 08 updates. “We can help you stay on top of your credit and if necessary, help you improve your score,” says McNeill.

To learn more about FICO 08, contact Fifth Third at (866) 475-4201 or visit 53.com.

All loans subject to credit review and approval.