FICO’s New Credit Score Rates Your “Credit Resilience”

Mortgage lenders, credit card companies, and other creditors now have one more way to help them determine whether you're a safe credit risk: FICO’s Resilience Index.

By , Attorney

Due to the economic downturn resulting from COVID-19, many lenders are tightening their standards when it comes to extending credit. Fewer credit applications are gaining approval, and some consumers have seen their credit limits slashed.

To help creditors figure out who is a good credit risk during these uncertain financial times, FICO (the same company that produces FICO credit scores) recently introduced its "Resilience Index." This new product predicts which consumers are best positioned to withstand the current recession and which consumers aren't so well-positioned.

What Is the Resilience Index?

The Resilience Index is a new credit scoring system that, supposedly, forecasts how well you'll get through tough financial times. The index gives you a score on a scale of 1 to 99. The lower your score, the better. This scale is different from FICO's traditional credit scoring model, which produces credit scores ranging from 300 to 850, and where higher is better.

According to FICO's website, a rating of 1 to 44 on the Resilience Index indicates you're "more resilient," meaning you're well prepared to handle the economic downturn. A rating of 45 to 59 puts you in "moderate" range. Having a rating of 60 to 69 makes you a "sensitive" risk, and 70 to 99 lands you in "very sensitive" territory, which means you're probably least able to recover financially.

How FICO Determines Your Resilience Index Score

FICO says that resilient consumers (those with lower scores) will generally have:

  • more experience managing credit
  • lower total revolving balances (someone who's maxing out their credit cards is less likely to be resilient in an economic downturn)
  • fewer active accounts, and
  • fewer credit inquiries in the past year.

FICO says that its Resilience Index will help lenders avoid widespread cutting and denying of credit. With this system, according to FICO, borrowers who are actually good credit risks can obtain new loans or keep their existing credit lines intact.

Review Your Credit and Take Steps to Improve It, If Necessary

If you're planning on getting a mortgage, refinancing an existing home loan, purchasing a vehicle, getting a new credit card, or increasing or maintaining your credit limit in the future, your Resilience Index score could become important. A potential creditor very well could take this information into account when considering your application.

However, it will probably be a while before creditors start using this new index in their credit application processes. So, now is an opportune time to go through your credit reports and take steps to improve your credit as needed.

Effective date: June 29, 2020