The FICO® Score 8 credit-scoring model explained

Mother and daughter discuss FICO Score 8 while eating cerealImage: Mother and daughter discuss FICO Score 8 while eating cereal

In a Nutshell

FICO® scoring versions differ from one another because each is based on a unique formula. Though FICO® Score 9 debuted in 2014, FICO® Score 8 is still widely used in lending decisions. It’s especially sensitive to high credit card utilization but is generally more forgiving of isolated late payments than previous versions.
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There are multiple versions of the FICO® credit-scoring model, and each is based on a unique formula. The most widely used is FICO® Score 8, which is generally consistent with previous versions but differs in several key ways.

As we explain in our rundown of FICO® scores, a FICO® credit score is a three-digit number ranging from 300 to 850 (and 250 to 900 for industry-specific scores). Your scores are largely based on your credit reports and can help lenders assess how likely you are to repay debt.

Though FICO® Score 9 debuted in 2014, many lenders still rely on FICO® Score 8 when making lending decisions. That’s why it’s important to know what goes into the FICO® Score 8 credit-scoring model.

What affects your FICO® Score 8 credit scores?

FICO® credit scores depend on the information in your consumer credit reports, so knowing what’s in those reports is a good place to start.

Your credit reports contain information such as how often you make payments on time and how many credit accounts you have open. This information can directly affect your FICO® Score 8 credit scores (as well as scores using many other credit-scoring models). For example, keeping your credit utilization low can help your FICO® Score 8 credit scores, while repeatedly neglecting to pay your credit card bills on time can hurt them.

Here’s a quick look at what goes into your FICO® scores and a few ways that the FICO® Score 8 scoring model differs from some of the other versions.

  • Payment history (35%): Your history of paying credit accounts is a big factor in determining your FICO® scores. Lenders understandably want to know whether you’ve paid your bills on time.
  • Amounts owed (30%): This refers to how much you owe on credit accounts, such as installment loans and credit cards, and the percentage of your available credit that you’re using (known as your credit utilization rate).
  • Length of credit history (15%): FICO® scores take into account how long you’ve had your oldest and your newest accounts. Also considered are the average age of all your accounts and how long it’s been since you’ve used certain accounts. Generally speaking, the longer the better.
  • Credit mix (10%): FICO® scores consider your mix of different credit accounts, though it’s not a key factor. These may include credit card accounts, mortgage loans and auto loans.
  • New credit (10%): New credit inquiries and recently opened accounts can influence your FICO® scores. For more information, check out our article on hard and soft credit inquiries.

What makes FICO® Score 8 different from previous FICO® scoring models?

Though FICO didn’t reinvent the wheel with FICO® Score 8, it does differ from previous versions in several key ways.

  • Isolated late payments matter less. FICO® Score 8 is a little more forgiving of a one-time late payment than previous versions. “Late” generally means at least 30 days after the due date.
  • Multiple late payments matter more. FICO® Score 8 may punish numerous late payments more severely than previous versions.
  • Small-balance collection accounts matter less. If the original balance on the account was less than $100, FICO® Score 8 ignores collection actions for the account. That’s a good thing, because a collection account can have a significant negative impact on your credit.
  • High credit card utilization matters more. According to FICO, FICO® Score 8 is “more sensitive” to higher card usage. Most experts recommend keeping your overall credit card utilization rate below 30%.
  • Credit card piggybacking matters less. Credit card piggybacking refers to the practice of being added to someone else’s credit account as an authorized user in order to help you boost your own credit. FICO claims that FICO® Score 8 “substantially reduces any benefit” of this practice.

How do FICO® Score 8 credit scores differ from the scores you see on Credit Karma?

FICO® scores aren’t the only credit scores you’ll see. Another popular credit-scoring model is VantageScore.

On Credit Karma, you can get your free VantageScore® 3.0 credit scores from TransUnion and Equifax. These scores may not match up exactly with credit scores based on the FICO® Score 8 credit-scoring model, but they rely on many similar factors. For example, your credit card utilization rate is considered a high-impact factor in both the VantageScore® 3.0 and FICO® Score 8 credit-scoring models.

Here are some other key similarities and differences among the most popular VantageScore® and FICO® score models.

Credit factorVantageScore® 3.0VantageScore® 4.0FICO® Score 8FICO® Score 9

Utilization rate

Very importantVery importantVery importantVery important

Historical utilization rate and payment info (trended data)

No impactMay affect your scoreNo impactNo impact

Collection accounts

Ignores paid collection accounts

Ignores paid collection accounts

Ignores medical collection accounts that are less than six months old

Weighs unpaid medical collection accounts less than other types of collection accounts

Ignores small-dollar “nuisance” accounts that had an original balance of less than $100

Treats medical collection accounts, including those with a zero balance, like other collection accounts

Ignores paid collection accounts

Weighs unpaid medical collections less than other types of collection accounts

A tax lien or judgment

Can have a significant impactAre less important than before, but can still have a significant impactCan have a significant impactCan have a significant impact

Does the FICO® Score 8 credit-scoring model really matter?

That all depends on what you want to do.

In general, if you’re trying to get a new credit card, car loan or consumer loan, then your FICO® Score 8 credit scores can matter. Since FICO® Score 8 credit scores are the most widely used FICO® scores, there’s a good chance a potential lender may use it.

On the other hand, if you’re working with a lender who’s using a different credit-scoring model — VantageScore® 3.0, for example — then that’s may be the one that matters most.

Remember: While FICO and VantageScore Solutions create the formulas, it’s the lenders who ultimately use your credit scores. And it’s the lenders who select which model and version to use. So even when FICO releases a new version of its credit-scoring model, a credit card issuer or auto lender might stick with whichever FICO® version it is already using.

“They can use whatever version they want,” says Joe Ridout, spokesman for the national consumer rights nonprofit Consumer Action.

Major differences between FICO® Score 8 and FICO® Score 9 credit-scoring models

Change takes time. Many lenders are still using FICO® Score 8 even though FICO released a newer, potentially more predictive model, FICO® Score 9.

As long as both credit-scoring models are in use, it’s a good idea to know how they differ. FICO® Score 9 isn’t a dramatic departure from its predecessor, but it does account for certain factors differently.

Here are the highlights.

  • Paid collection accounts matter less. If you’ve paid off a collection account in full, it no longer counts against you with FICO® Score 9. With FICO® Score 8, paying off a collection account doesn’t necessarily help your scores. That’s can be an issue, because collections can stay on your credit reports for a long time.
  • Medical collections matter less. Until recently, there wasn’t a significant distinction between medical collections accounts and other types of collections accounts — at least in terms of their impact on your credit. But newer credit-scoring models, such as FICO® Score 9, deemphasize the impact of unpaid medical collections accounts.
  • Rental payments matter more. FICO® Score 9 cares if you pay rent on time, including rental payment history as a factor in your scores — provided your landlord reports it to at least one of the three consumer credit bureaus. This can be a boon to those who have just started building credit from scratch and don’t have much lender information on their credit reports.

Bottom line

If you’re shopping for a new loan or credit card, it’s smart to find out which credit-scoring model (or models) may be used to evaluate your credit.

“If it were me, I would ask direct questions,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. “Which scores are you using? Which version are you using?”

One credit-scoring model might factor in medical collections, while another might give you the proverbial gold star for years of timely rent payments. The more you know about what goes on behind the scenes, the better you can try to position yourself in the eyes of a prospective lender.

Not sure where to go from here? Consider getting your free VantageScore® 3.0 credit scores from TransUnion and Equifax on Credit Karma. You can also read the Credit Karma Guide to Building Credit for general tips on building and maintaining healthy credit.

About the author: Dana Dratch is a personal finance writer (and coffee fanatic). She covers credit, money and lifestyle issues. Read more.