FICO 10 and FICO 10 T are new credit scoring models developed by FICO that have the potential to change the credit industry in a major way.
Credit expert John Ulzheimer, who worked for FICO for seven years and has almost 30 total years of experience in the industry, explained what FICO 10 and FICO 10 T are and what they mean for you as a consumer in an episode of Credit Countdown.
Disclaimer: The views and opinions expressed in this article are strictly those of John Ulzheimer and do not necessarily reflect the official stance or position of Tradeline Supply Company, LLC. Tradeline Supply Company, LLC does not sell tradelines to increase credit scores and does not guarantee any score improvements. Tradelines can in some cases cause credit scores to go down.
What Are FICO 10 and FICO 10 T?
The FICO 10 and FICO 10 T credit scoring models are part of the latest generation of credit scores in FICO’s lineup, which also includes FICO score generations 2, 3, 4, 5, 8, and 9. Currently, the most widely used base model is FICO 8. With every new FICO score, FICO tries to improve upon the power of their scores to predict consumer defaults, which is the overarching goal of credit scores generally.
The tenth generation of FICO credit scores is technically called the FICO 10 Suite, as it contains multiple different versions of FICO 10, although in common language this entire group is often simplified as just “FICO 10.”
FICO 10 was announced in early 2020, and it has received much media attention due to the changes that distinguish it from its earlier counterparts.
Why Are Consumers Worried About FICO 10?
Media coverage of the new suite of credit scores tends to focus on the claim that some consumers may see their credit scores go down with FICO 10.
However, John Ulzheimer says that this creates “controversy where controversy doesn’t exist.”
Why? Here are two reasons.
1. The FICO 10 Suite is a normal redevelopment of the FICO credit scoring system.
As we discussed above, FICO regularly redevelops their credit scoring models in order to make them more and more predictive of credit risk.
This is just like what other companies do with their products. Think of Apple and the iPhone: there isn’t just one iPhone anymore. They introduce newer generations of the iPhone, and people want to upgrade to the new and improved models that work better.
This does not mean that the previous versions were “bad,” just that there is a new version that may be better.
2. Your credit scores will be different every time FICO redevelops its credit scoring system.
With every change that is made to the credit scoring system, as an inevitable consequence, your credit score will change. That’s not necessarily a bad thing. Your credit score could go up, or it could go down, or it could remain similar to where it was.
Regardless of any changes made, the fact is that if you have a good credit score with one scoring model, you will likely still have a good credit score with a different model. The same goes for bad credit scores. Although different credit score versions have different ways of going about it, they all share the ultimate goal of predicting a consumer’s credit risk, and this will be reflected in your scores regardless of which particular credit scoring model is used.
There are dozens of different credit scoring models, and your credit score is going to be different with each model.
How Will FICO 10 Affect Your Credit Score?
In terms of how FICO 10 could affect your score, John says that newer credit scoring models such as FICO 10 do a better job of separating high-risk and low-risk consumers than older models. In other words, if you have good credit, your score is likely going to be higher with FICO 10. If you have bad credit, your credit score is likely going to be lower with FICO 10.
According to John, this is normal and it is what you would expect to see with any new credit scoring system.
What About FICO 10 T (FICO 10 Trended)?
The “T” in FICO 10 T stands for trended data.
FICO 10 T is unique among FICO’s roster of credit scores because it is the only tri-bureau FICO score on the market with trended data. (FICO competitor VantageScore also has a credit score that uses trended data, VantageScore 4.0.)
What Is Trended Data and Why Is It Unique?
When you check your credit report, you may see that some of your accounts show a history of your balances, your payments due, and how much your payments actually were each month for the past 24 months.
Being able to see this information over time makes it easy to understand the trends in your usage of the account.
Here are some examples of the types of insights trended data can provide:
If you are running up large balances over time. If you are keeping your balances relatively low over time. If you have been making your minimum payments over time. If you have been paying in full over time. What percentage of your balance you have been paying over time.
Trended data allows credit scores to consider trends in how you have managed your accounts over the past 24 months.
FICO 10 T can now consider this data as part of calculating your credit score.
The information trended data provides is very valuable because it adds another level of data that helps to predict the likelihood that a consumer will default.
For example, a consumer who has a perfect payment history and pays in full every month or keeps a relatively low balance is probably going to score better with FICO 10 than a consumer who maxes out their credit cards or keeps a relatively high balance over time, even if they pay off their credit cards every month.
The research done on trended data demonstrates that transactors, those who charge balances and then pay in full, carry less risk than revolvers, who roll over a portion of the balance from month to month rather than paying it off in full each month.
Consumers who carry a balance over time instead of paying their balances off in full every month will be penalized by FICO 10 T.
To summarize, trended data is what makes FICO 10 T different from the base version of FICO 10. FICO 10 still works like other traditional credit scoring models in that it only looks at a “snapshot” of your credit report at a given time.
Should You Be Worried About the FICO 10 Suite of Credit Scores?
You don’t need to stress out about FICO 10, especially if you have good credit, as you will still have a good credit score under FICO 10.
The same practices that are important in other credit scoring systems still apply to FICO 10 and will still reward you with a good score:
Always make your payments on time. Pay off your credit cards in full every month. Keep your balances low relative to your credit limits (maintain a low revolving utilization ratio). Limit the number of hard inquiries that hit your credit report by only applying for credit when you actually need it.
We hope this article helped you understand the new FICO 10 and FICO 10 T credit scores. Check out the video below, and browse our Knowledge Center and subscribe to our YouTube channel for more content like this!
In credit repair, the credit dispute process involves the use of two systems called Metro 2 and e-OSCAR. If you are unfamiliar with these terms, as is likely the case for most consumers, then keep reading this article. Credit expert John Ulzheimer takes us behind the scenes of the consumer dispute process and explains the importance of the Metro 2 and e-OSCAR systems in consumer credit disputes.
The Right to Dispute Information on Your Credit Reports
The Fair Credit Reporting Act (FCRA) is a federal statute that confers rights to consumers with regard to their personal credit reports.
Where Does the Information on Your Credit Reports Come From?
The information on your credit reports is provided by data furnishers, such as your lenders, to the three major credit reporting agencies (CRAs): Equifax, Experian, and TransUnion.
According to the Consumer Financial Protection Bureau (CFPB), there are approximately 16,000 of these data furnishers in the United States.
Here are some examples of data furnishers that may report information about your credit accounts to the credit bureaus every month:
Banks Credit unions Financial service providers Mortgage lenders Auto lenders Student loan servicers Debt collector
Disputing Information With the Credit Reporting Agencies (Indirect Dispute)
One way to dispute something on your credit report is to file a dispute with the CRAs. This method is called an indirect dispute because rather than taking your dispute directly to the furnisher itself, you are asking the credit bureau to investigate the claim on your behalf.
The credit bureau is then obligated to conduct a “reasonable investigation” into your dispute, which typically includes contacting the furnishing party and asking them if there is any validity to your credit dispute.
To understand how indirect disputes work, we first need to define Metro 2 and e-OSCAR. Then, we can take a look at each step in the procedure and see how Metro 2 and e-OSCAR play important roles in the dispute process.
What Is Metro 2?
Metro 2 is the “language” used by data furnishers to communicate information to the credit bureaus. It is the standard (and only) language used for this purpose. The previous version of this language, Metro 1, is outdated and is no longer used.
The Metro 2 language consists of alpha, numeric, and alphanumeric characters. These characters go into different fields on your credit report which indicate certain things.
Metro 2 is communicated through the Consumer Data Industry Associate (CDIA) using a manual called the Credit Reporting Resource Guide (CRRG).
When the data furnishers receive dispute forms from the credit bureaus, the information on those forms is encoded in the Metro 2 language.
What Is e-OSCAR?
e-OSCAR is a communication protocol analogous to a phone line between the credit bureaus and the companies that furnish data to them. It is used to transmit information such as dispute forms back and forth between the credit bureaus and data furnishers.
Like Metro 2, e-OSCAR is universal, meaning it is the only communication method used in the dispute process and therefore it is used by all three credit bureaus.
How the Indirect Dispute Process Works
You challenge information on your credit report by filing a dispute with a credit bureau. The credit bureau assigns a dispute code to your claim, which is meant to indicate the nature of your dispute. The credit bureau sends an automated consumer dispute verification form (ACDV) to the data furnisher using e-OSCAR. The furnishing party logs into the e-OSCAR system to view the disputes. The data furnisher looks at the dispute code on the ACDV indicating the reason for the dispute. For example, the consumer may have stated that the disputed information does not belong to them. The data furnisher goes into their internal system to review the consumer’s account in order to verify or refute the disputed information. The furnishing party then reports the results to the credit bureau by indicating this on the ACDV and sending the ACDV back to the credit bureau via e-OSCAR. The credit bureau updates your account in their records to reflect the correct information and sends a copy of the report to the consumer.
You can read more about the forms used in the credit dispute process in another article.
Filing a Dispute is Free for Consumers
As a consumer, you do not have to pay to dispute information on your credit report or to have that information corrupted. The right to be able to dispute items for free is mandated by the FCRA.
This includes the updated credit report that the credit bureau sends to you once their investigation is complete.
Summary of Metro 2, e-OSCAR, and the Credit Repair Dispute Process
The FCRA gives you the right to dispute information on your credit report for free. Data furnishers, e.g. lenders, report information about your accounts to the credit bureaus every month. You can dispute something on your credit report by going to the CRAs, which is called an indirect dispute. The CRAs and data furnishers communicate dispute information using forms and codes via the e-OSCAR platform and the Metro 2 language. Once a credit bureau finishes their investigation into your dispute, they confirm or update the information on your credit report and send you a copy.
Want to see the video version of this article? Watch it below or visit our YouTube channel, where we drop new educational credit videos every weekday!
When you file a credit dispute, there are certain forms and processes that are used in order to resolve the dispute.
To help familiarize you with the credit dispute process, let’s go over:
What these forms are used for When these forms are used The information that is included on these forms
The specific forms that are required depend on which type of dispute you are filing.
Indirect Disputes
The credit bureaus get your credit data from the individual lenders or companies you have accounts with, also known as data furnishers. Some examples of these businesses include financial services companies, banks, credit unions, credit card issuers, and debt collectors.
When you file a credit dispute with the credit reporting agencies rather than contacting the business that is furnishing the disputed data, this is called an indirect dispute, since you are not going directly to the company that is providing the incorrect information.
Automated Consumer Dispute Verification Form (ACDV) or Consumer Dispute Verification Form (CDV)
Indirect disputes involve a form called the Automated Consumer Dispute Verification form (ACDV) or the Consumer Dispute Verification form (CDV). The ACDV is simply the modern digital version of the CDV, which refers to the analog format of the original document on paper.
When you initiate a dispute with a credit bureau, the credit bureau generates an ACDV that contains the information about your dispute.
The credit bureau then sends the completed ACDV form to the data furnisher using a communication system called e-OSCAR.
At this point, the lender furnishing the disputed data investigates the claim, updates the ACDV, and sends the form back to the credit bureau.
Finally, the credit bureau reviews the form, makes the appropriate changes to the consumer’s credit report, and notifies the consumer of the results of the dispute.
Direct Disputes
If you choose to dispute the inaccurate information on your credit report with the furnishing party, that is called a direct dispute, because you are going directly to the lender without involving the credit bureaus.
Automated Universal Dataform (AUD) or Universal Dataform (UDF)
When you make a direct dispute with the furnishing party, the data furnisher should correct the error and fill out an Automated Universal Dataform (AUD) reflecting the correction. The AUD is the automated digital version of the form, which was originally called the Universal Dataform (UDF).
Once the AUD has been prepared, the furnishing party sends it using e-OSCAR to all of the credit bureaus where the error is appearing on your credit report. The data furnisher is obligated to contact each credit bureau to ensure that the error has been removed from all three of your credit reports.
26 million consumers in America have no credit record whatsoever. On top of that, there are an additional 19 million consumers who do have credit files, but they do not contain sufficient credit information to be scored by a widely available credit scoring model. These consumers—in total making up nearly one in five American adults—are the “credit invisibles” and “credit unscorables.”
Due to a lack of credit history, these consumers are virtually invisible to the credit system. That means credit can be very hard or even impossible to obtain when it is needed. After all, we all know that “it takes credit to get credit,” since lenders often don’t want to take the chance of lending to someone with no prior credit record.
“Alternative data,” which involves using data sources other than traditional credit reporting information to make lending decisions, is a concept that is becoming increasingly popular as one possible solution to the problem of credit invisibility.
Let’s shed some light on the emerging topic of alternative credit data and how it could help or hurt consumers.
What Is Alternative Credit Data and How Does It Differ From Traditional Credit Data?
Traditional credit data refers to your credit report, credit scores, and the information they contain. In other words, traditional credit data primarily consists of information about how you manage your tradelines, which are the credit accounts you own.
When we are talking about credit, we are almost always discussing traditional credit data since that is what is used to make most lending decisions.
In contrast, alternative credit data is financial information about consumers that is not typically included in traditional credit reports. Examples of alternative credit data sources include rent payments, utility payments, full-file public records, and data from alternative financial service providers (ASFPs), such as payday lenders.
Traditional Credit Data Alternative Credit Data
Contains information about the tradelines in your credit report Information comes from other sources since there is insufficient credit data
Payment history for loans and credit cards Data from alternative financial service providers (e.g. payday lenders)
Credit utilization ratio Utility payment history
Delinquencies Rent payment history
Credit mix Consumer-permissioned data
Credit inquiries Full-file public records information
What Is the Purpose of Alternative Credit Data?
Alternative data includes data that consumers may choose to allow credit reporting companies to access, such as bank account balances.
For the millions of consumers who lack credit reports based on traditional credit data, building credit and obtaining credit is a challenge. Without a verified credit history, lenders cannot make an informed decision about whether to extend credit to a consumer.
One way the credit scoring industry is trying to address this problem is by creating new types of credit scoring algorithms that utilize different sources of data that are not contained within a consumer’s traditional credit report but still have predictive power with regard to a consumer’s credit risk.
These alternative data sources, such as rent and utility bill payments, are more accessible and more commonly used among those who are credit invisible.
The idea behind alternative credit data is that a consumer’s non-credit financial information can still be used to predict whether the consumer is financially responsible and creditworthy. This information can help lenders provide credit to consumers who may have a thin credit file or no credit file at all but who may still be creditworthy.
Therefore, using alternative data to make lending decisions could theoretically allow lenders to expand their customer base and earn more revenue while providing more credit to consumers who lack a traditional credit history.
How Do Consumers Benefit From Alternative Data?
The benefit to consumers, of course, is that many consumers who may be creditworthy but are invisible to the traditional credit system could potentially use alternative data as a path to building credit where they lacked one before.
For example, a consumer who gets a good credit score using an alternative data scoring method might now be able to get approved for an unsecured credit card, whereas they might have had to put down a deposit to get a secured credit card if the lender had only been able to use traditional credit data. This would allow the consumer to hold onto the cash they would have had to put down as collateral and instead save it for emergencies or some other use.
Applications of Alternative Credit Data
Consumers who are “credit invisible” but have a history of being financially responsible in other areas may benefit from the use of alternative credit data.
Although alternative credit data is still a relatively new field, major players in the credit industry are already working on developing new credit scoring tools that make use of alternative data.
FICO XD and FICO XD 2
FICO is working on developing new credit scoring models that can reliably assess the credit risk of consumers who are unscorable using traditional credit scoring methods.
The FICO Score XD “leverages alternative data sources to give [bankcard] issuers a second opportunity to assess otherwise unscorable consumers.”
Nerdwallet reports that the FICO XD model uses phone, utility, and cable payment data as well as things like information about your home if you are a homeowner, occupational licenses you may have, and your bank records.
Compared to traditional FICO scores, this model has the same credit score range of 300 to 850 and the same expected credit risk for each score group within that scale.
According to FICO, the XD scoring model can provide a score for more than half of all credit applicants that had previously been unscoreable, which adds millions of consumers to the scorable population.
Although only about a third of applicants that can be scored with FICO XD receive scores higher than 620, which is considered to be fair credit, the company claims that almost half of borrowers with higher FICO XD scores later go on to obtain credit and achieve traditional FICO scores of 700 or greater.
FICO XD’s newer version, FICO Score XD 2, works similarly but has been further refined to provide more accurate results.
Similarly, the FICO Score X incorporates alternative data sources for credit scoring, such as telecom payments, mobile payments, “digital footprint” data, and even data from psychological surveys to provide a way for international lenders to score previously unscorable consumers.
UltraFICO
The UltraFICO score, currently being pilot tested by Experian, will use “consumer-permissioned” banking data to enhance its scoring capabilities. In this case, what that means is that consumers can choose to contribute data about their checking, savings, and money market accounts in order to allow lenders to assess their creditworthiness by looking at their overall financial profile.
Some of the specific financial factors considered by the UltraFICO score include:
A history of positive bank account balances is a beneficial factor with the UltraFICO credit score.
How long you have had your bank accounts open How often you make banking transactions When your most recent bank account transactions occurred Verification that you often have money saved in your bank accounts A history of having positive bank account balances
FICO says this credit scoring model can help increase access to credit for “nontraditional borrowers” who have limited credit histories, particularly young consumers, immigrants, and those who are rebuilding their credit after experiencing financial distress.
The company also states that UltraFICO could potentially improve credit access for most Americans and could be especially helpful for those whose credit scores are in the “grey area” of the upper 500s and lower 600s or those whose scores just barely miss a lender’s credit score cutoff.
Seven out of 10 consumers who have had consistently positive banking habits in the past three months could get a higher UltraFICO score than their traditional FICO score, according to the company’s website.
Experian Boost Credit Score
Experian has also come up with their own alternative data solution called Experian Boost, which is a free service that allows users to provide access to their bank accounts in order to get credit for their on-time payments of bills such as electricity, water, gas, phone plans, cable, and even Netflix.
One major advantage with Experian Boost is that it only counts positive payment history, so missed payments will not hurt your score. If the program detects that you have missed a payment, it will remove that account from your credit file so that the late payment will not hurt your score.
Experian Boost lets you add positive payment history from your utility bills and some streaming services.
The New York Times has reported that the reason why Experian Boost does not consider negative information about your bills is that anything negative on your record will most likely end up on your credit report anyway, either because your utility provider may start reporting it to the credit bureaus or the account may get sold to a collection agency which then reports the collection account.
In addition, Experian says that you can disconnect your bank accounts if your FICO score decreases because of Experian Boost and that you can always reconnect your account later once your finances have improved.
According to Experian, consumers who sign up for Experian Boost receive an average boost to their FICO score of 13 points. Those who do not see a boost initially may see a larger effect over time if they keep their account connected as the program continues to check your account for payments you made on time and adding those to your credit profile.
If Experian Boost helps your credit but you later decide for whatever reason that you no longer want to use it, be aware that the positive payment history that was helping you will be removed from your credit profile, so it’s likely that your credit score will fall.
TransUnion FactorTrust
In 2017, TransUnion acquired FactorTrust, a company that provides lending data on short-term and small-dollar loans (e.g. payday loans), which are not reported in traditional credit reports and are often utilized by underbanked and credit invisible consumers.
This information will allow TransUnion to assess credit risk for a larger group of consumers.
In addition, TransUnion says that their small-dollar loan data will help lenders comply with the Consumer Financial Protection Bureau’s recent changes to payday lending rules meant to protect consumers.
Equifax DataX
In 2018, Equifax acquired a specialty credit reporting agency and provider of alternative credit data called DataX. Equifax stated that they plan to use DataX to help lenders improve financial inclusion and access to credit, especially for consumers who are underbanked.
DataX claims that they can help lenders better evaluate the credit risk levels of prospective customers by utilizing a “massive, proprietary consumer database that provides valuable insights on consumers not covered by traditional credit information sources.” This database contains demographic, financial, and credit data on millions of consumers.
The Downsides of Alternative Credit Data
In theory, alternative data sounds like a promising solution to the credit catch-22 and the problem of credit invisibility. According to FICO’s white paper on the subject, the use of alternative data allows millions of previously unscorable consumers to achieve credit scores that are high enough to get access to credit.
However, while the credit scoring and credit reporting companies only talk up the positives of their alternative data products, there are some drawbacks to this approach that also need to be considered.
Alternative Data May Perpetuate Credit Inequality
Although alternative data is marketed as a solution to credit invisibility, it’s possible that it could actually worsen credit inequality.
Despite FICO’s impressive claims, in the company’s white paper, we can clearly see how alternative data in credit scoring might not be so helpful to many consumers.
According to their research, about a third of the “newly scorable” consumers scored 620 or above using the alternative data score. These are the millions of consumers they refer to that may now be able to access credit.
But if only a third of consumers scored 620 or above, that means two-thirds of consumers now fall below 620 with the alternative data score, which is considered bad credit. That means there are twice as many of the newly scored consumers who end up with bad credit than those who end up with good credit after the alternative data model has been applied.
In many cases, having bad credit is even worse than having no credit, because instead of starting from scratch, you have derogatory information on your credit report that is going to weigh down your credit score. This can make it even more difficult to get your credit to a good place than if you had started with no credit history at all.
The results of FICO’s alternative data research bear out the concerns presented by the National Consumer Law Center (NCLC). According to the NCLC, if utility payments become part of the credit reporting system, this could result in millions of consumers getting negative marks and would disproportionately impact low-income consumers and people of color.
Although alternative credit data is pitched as a way to lift millions of consumers out of credit invisibility, in reality, it is another profit-generating tool created by the credit scoring and reporting companies to sell to financial institutions. Any benefit or harm to consumers is incidental to the primary goal of the banks making more money by lending to more consumers.
As you know from our article, “What Happened to Equal Credit Opportunity for All?” the credit scoring system was built upon and continues to perpetuate a history of financial inequality in our country.
Unfortunately, although it has the potential to help millions of consumers if implemented in the right way, it seems likely that alternative credit data may just end up being used to continue the legacy of inequality and discrimination that is still firmly entrenched in the credit industry and in our society in general.
Data Privacy Concerns
Another major concern with alternative data is privacy. In recent years, major data breaches have been happening left and right, including the 2017 Equifax breach that compromised the information of around 148 million consumers. The credit bureaus have shown with multiple egregious security breaches that consumers cannot trust them to safeguard their personal information.
Experian Boost, as well as other similar “consumer-permissioned” data reporting systems, require users to allow access to their bank account in order to report bill payments. For many, it may be hard to stomach the idea of giving FICO or the credit bureaus access to their personal information when they have repeatedly mishandled sensitive consumer data. Those who do choose to use such services do so at the risk of their information potentially being compromised.
Some Lenders May Not Use Alternative Data Credit Scores
Since alternative credit data is still a relatively new development, one downside is that many lenders may not be using alternative data or credit scores based on it in order to make their lending decisions.
The credit industry is slow to change, as we talked about in “Do Tradelines Still Work in 2020?”, so it may take several years for alternative credit data to be widely adopted.
Therefore, at this time, there is no guarantee that your lender of choice will have the ability to access and use your alternative credit data.
Conclusion: Is Alternative Data Helpful or Harmful?
Alternative data has the potential to lift millions of consumers out of credit invisibility, which is a step toward providing equal credit opportunity to these consumers.
However, it has just as much potential to harm consumers and perpetuate credit inequality due to the issues we discussed above.
As with any credit reporting or credit scoring tool, we have to remember who these tools are designed for and who they are intended to serve: the banks.
Ultimately, the purpose of alternative credit data is to help lenders make more money by lending to a greater number of consumers. For consumers, the benefits and risks are not so clear cut.
If you have no credit record or a thin credit file, alternative credit data scoring systems may be worth considering and trying out. As with any major credit moves, be sure to do your due diligence as a consumer by researching how these programs work and how you can protect yourself and your credit if you do not get the results you are looking for.
What is your take on the issue of alternative credit data? Have you tried any of these alternative data services yourself? Drop a comment below to let us know your thoughts!
In 
26 million consumers in America have no credit record whatsoever. On top of that, there are an additional 19 million consumers who do have credit files, but they do not contain sufficient credit information to be scored by a widely available credit scoring model. These consumers—in total making up nearly one in five American adults—are the “
