What You Need to Know About FICO’s Resilience Index


We all know that your FICO® score has a far-reaching impact, from your ability to secure a mortgage to financing a car or opening a new credit card. Unfortunately, many people have been impacted by the pandemic’s effects on our national economy, causing their credit scores to fall. But have you heard of the FICO Resilience Index? It may be able to help improve your creditworthiness in times of economic uncertainty.

What It Is

Your FICO score is a number that reflects your creditworthiness, which is your predicted ability to repay a loan. The FICO Resilience Index is a new supplement to the standard FICO score, intended to gauge whether you can pay your bills during a recession or other economic upheaval. The Resilience Index addresses our uncertain economic times by providing a way for lenders to determine if a borrower has enough “resilience” to weather an economic downturn. With the index, people who have lower credit scores but other mitigating factors — a decent emergency fund, stable income, solid employment — may still have access to credit.

How It Works

The FICO Resilience Index considers many of the same factors that determine your FICO credit score, including payment history, account balances, and new credit inquiries. But unlike the FICO score, which weights timely payments most heavily, the FICO Resilience Index is most affected by your total debt amount and how many accounts you have open.[1]

Another difference between the two scoring models: You want a high credit score but a low resilience score. A lower number indicates that you’re more resilient and less sensitive to economic challenges. Scores between 1 and 44 are considered the most able to handle an economic downturn and continue meeting their financial obligations.

What Your Resilience Index Score Means

The FICO Resilience Index has found that more resilient consumers usually have:[2]

  • Experience managing credit

  • Low revolving debt balances

  • Only a few accounts open and active

  • Fewer credit inquiries within the past year

Who It Helps

Suppose you have a “fair” FICO score in the 580-669 range[3] but a low FICO Resilience Index score. In that case, it could indicate to lenders that you're a lower credit risk than, say, a potential borrower with a fair FICO score but no savings or stable job history.

Potential borrowers with lower emergency cash reserves, income, and credit scores, or with inconsistent histories in work or financial management, may not see the benefits of this new index. Consult a financial planner to learn more about improving your credit and managing debt.

Bottom line: Don’t stop working to improve your credit score. Keep revolving balances low and don’t get new credit unnecessarily. Pay your bills on time. Your credit score is still the primary indicator to lenders of your creditworthiness and gets weighted heavily in their consideration of your risk level.

Interested in learning more about FICO scores and checking your creditworthiness? Let’s talk!


Sources:

[1] MarketWatch, “What is the FICO Resilience Index, and how will it affect your credit?”, August 31, 2020.

[2] FICO.com, “FICO Resilience Index Now Available for Lenders to Pilot,” June 29, 2020.

[3] FICO.com, “Understanding FICO® Scores.”


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