So How Does It Work?
According to a CNBC report, the FICO Resilience Index won’t ding your credit as hard for a missed payment or delinquent account. While those things still matter, this new score puts more emphasis on low credit balances and credit utilization.
With a score ranging from 1 to 99, the FICO Resilience Index looks at your credit management experience. If you have a history of carrying multiple credit card balances, for example, you score will be higher. If you’ve been managing your credit well, with fewer open accounts and few annual credit inquiries, your score will be lower. The lower the score, the better. It means that lenders believe in your ability to adapt to changing market conditions. In other words, you are more financially resilient.
FICO is touting this new scoring method as having a positive impact on the economy — especially in the wake of so much destruction that global shutdowns have caused. It’s a way of evaluating borrowers with a little bit more context than traditional credit scores provide. With banks becoming more stingy, the FICO Resilience Index may help kick start borrowing again. Which in turn leads to increased spending, giving the national economy a much-needed boost.
You can find more information about the differences between the FICO Resilience Index and your regular FICO score on their website.
Shutterstock
