How new FICO changes may lower — or boost— your credit score (2024)

FAQs

How does new credit affect credit score? ›

When you apply for and accept a new loan or credit account, your credit scores typically decline a few points. This impact is short-lived, however, and scores typically rebound within a few months. Eventually, they may even wind up better than before as you demonstrate your ability to responsibly manage your new debt.

Payment History — This makes sense because it's the largest factor used to calculate your credit score. New payment behavior is a common cause for credit-score fluctuation. Additionally, when making payments on an installment loan, mortgage or auto loan, you are decreasing the amount of overall debt.

The FICO 10T credit score includes trended data, which looks at individual consumers' payment and debt history for the previous 24-plus months to help calculate their credit scores. According to FICO, the new model is the most comprehensive scoring model created by the company to date.

Since the new credit scoring models take into account alternative credit data (rent, utilities, telecom payments, etc.), they can give these otherwise credit-invisibles a chance to show off their on-time payment histories and enhance their mortgage eligibility.

Opening a new card account will boost your available credit, which can drive down your overall utilization, and that could have a positive effect on your score. This assumes, of course, that you don't run up a big balance on the new card.

It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.

Why did your new mortgage drop your credit score by 100 points? Your new mortgage can cause your score to drop because it's a new account and likely a significant debt added to your credit history. Once you establish a positive payment history, your score will likely increase.

Heavy credit card use, a missed payment or a flurry of credit applications could account for a credit score drop. Amanda Barroso is a personal finance writer who joined NerdWallet in 2021, covering credit scoring. She has also written data studies and contributed to NerdWallet's "Smart Money" podcast.

Your credit scores typically update at least once a month. However, this may vary depending on your unique financial situation. Credit scores are calculated based on the information included in your credit reports. So, for your credit scores to update, the information in your credit reports must first change.

Is FICO your true credit score? ›

Is "credit score" the same as "FICO^® score"? Basically, "credit score" and "FICO^® score" are all referring to the same thing. A FICO^® score is a type of credit scoring model. While different reporting agencies may weigh factors slightly differently, they are all essentially measuring the same thing.

Once the incorrect information is changed, a 100-point jump in a month might happen. Large errors are uncommon, and only about one in 20 consumers have one in their file that could impact the interest on a loan or credit line. Still, it's important to monitor your score.

Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.

At first, the VantageScore used a very different scoring range, 501–900, but in 2013 it changed its range to be the same as FICO: 300–850. Both use similar scoring factors, although the VantageScore places more weighting emphasis on the length of an individual's credit history.

New credit makes up 10% of a FICO^® Score. When you apply for new credit, inquiries remain on your credit report for two years. FICO Scores only consider inquiries from the last 12 months. People tend to have more credit today and shop for new credit more frequently than ever.

Having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.

That's because a new credit application generally creates a hard credit inquiry, which can cause your credit scores to drop by a few points. Multiple credit applications in a short period of time could also indicate that your financial situation has changed negatively—and they might cause your credit scores to drop.

Answer: Opening another credit card could help the score a little (about 4 to 6 points). Scenario: You have less than 4 accounts, (1 credit card, 1 car loan and 1 utility account). Answer: Adding a 2nd credit card account will substantially improve your score (about 7 to 15 points).