FICO® Resilience Index - What is your Resiliency under Stress?
Published by: Julie Bonvillain, CFP - VP, Director of Financial Planning
What is your resiliency under stress?
The FICO® Resilience Index social scoring system was released in 2020 by Fair Isaac Corporation. While the traditional FICO® score predicts credit risk independent of the economy the Resilience Index considers the current state of the economy when predicting a consumer’s credit risk and assigning a score. When layered with the traditional model, this new model may help those who do not have good traditional FICO® scores get better access to loans. It also gives lenders different information when assessing individual risk and making credit decisions.
The question this index answers is, “how likely are you to pay your bills on time during economic stress (like a pandemic or market volatility)?” Your resiliency score is based on your previous bill paying behavior.
You could benefit from this model if:
• you have a low traditional FICO® score
• you have a history of paying bills on time (during good times and bad)
• you pay off your credit cards each month
The Index Score ranges from 1-99 and ranks your resilience or sensitivity to an economic downturn. The LOWER the number the BETTER.
• 1-44 More resilient to changes in economic conditions
• 45-59 Moderately resilient to changes in economic conditions
• 60-69 Sensitive to changes in economic conditions
• 70-99 Very sensitive to changes in economic conditions
Some credit reporting agencies are now implementing the second generation of the Index. The FICO® Resilience Index 2 which offers more advanced predictions on a borrower’s financial resilience to disruptions in the future and across economic cycles.
Sources
https://www.credit.com/blog/fico-resilience-index/
https://www.experian.com/consumer-information/fico-resilience-index
https://www.businessinsider.com/personal-finance/fico-resilience-index-credit-risk-2020-7
https://www.fico.com/en/resource-access/download/38481
https://www.fico.com/blogs/fico-resilience-index-now-available-lenders-pilot