If you plan to apply for credit cards, loans, or a mortgage, or if you have a credit score in the 600s, take note: Today, FICO debuts the Resiliency Index, a new way to rate borrowers’ ability to weather a recession or other economic volatility. Lenders who already receive FICO credit scores will initially receive the new score for free.
As Equifax’s website explains, the Resiliency Index “answers questions like, ‘Which 680s are more likely to go bad when financial stress is exerted on a consumer population?'” Equifax says that during a normal economy, consumers with 680 credit scores have a delinquency rate of roughly 4.4%; in a recession, the least resilient consumers have a 13.3% delinquency rate.
The scale ranks you from 1 to 99, based on metrics such as the number of credit inquiries and active accounts (lower is better), credit balances (less is preferable), and years of experience managing credit (more is good). FICO says that people with credit scores over 740 are unlikely to receive poor resiliency scores, while a third of people with scores from 600-620 qualify as “least resilient.”
Jim Wehmann, executive vice president of FICO Scores, told CNBC that FICO studied 70 million consumers’ files to determine patterns among consumers who missed payments through the last recession and after. He emphasizes the analysis differs from simply tracking missed payments. “You can have some level of delinquency and still be very resilient.”
The hitch? There’s no current way to find out your own Resiliency Index score. Wehmann told CNBC there’s an effort underway to ameliorate that.