What FICO’s New Resilience Index Could Mean for You

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FICO Resilience Index Score
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If you’re looking for a loan or thinking about applying for a credit card, you may soon have to contend with FICO’s Resilience Index

The index is a new way for lenders to gauge risk during tough economic times — like what we’re going through now because of the coronavirus pandemic

But exactly what is the FICO Resilience Index and how does it affect you? In this article, money expert Clark Howard shares his thoughts on it. And we’ll give you a tip on what to do before applying for your next loan or credit card.

What Is the FICO Resilience Index?

The FICO Resilience Index is a new analytical tool meant to complement — not replace — your credit score.

“This new score is really to help lenders, because one of the things that lenders discovered during the Great Recession in 2008 and 2009, is that the FICO score turned out to be a very poor predictor of who’s going to have trouble with credit in a recession. The idea behind it is that it gives lenders another method to be able to make a decision,” Clark says.

On its blog, FICO details the scoring model for the Resilience Index, which is on a 1-99 scale. People with a score between one and 44 will be considered the most resilient in an economic downturn. So the lower your number, the better.

Scoring model for FICO Resilience Scores
Screenshot from FICO blog

What Does the FICO Resilience Index Mean for You?

Clark says that just because FICO has come up with this new tool, it doesn’t mean lenders will use it.

And he says that the new score isn’t necessarily a good thing or bad thing for consumers. Here’s how he explains it:

“Let’s say someone has a good credit score and they have a good Resilience Index Score. They would be considered greenlighted to be able to borrow money. But even if somebody had a great credit score, but their Resilience Score was low, where they would normally be approved for credit, they likely wouldn’t be based on that Resilience Score.”

Takeaway

If you’re looking to borrow money for a car or home, Clark recommends that you take the time to go to more than one lender. Shopping around is more important than ever.

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“In a time like this, with lenders reacting so differently, it’s much more important even than it regularly is, to go to multiple lenders, because even a ‘yes’ could carry a very different interest rate with one lender vs. another — even more than it normally would,” Clark says.

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