FICO credit scores are vital to American consumers. They determine whether people can get loans to open a business, buy houses, buy cars or even get approval to rent an apartment.
And though they’ve been increasing over the past few years, that may soon end.
Fair Isaac Corp., the company responsible for the FICO credit scoring model, will be launching a new scoring model that factors an individual’s debt into their credit score, The Wall Street Journal reports.
This is the first update to the scoring model since August 2014, when the FICO 9 model was released, according to CNBC.
With the average American carrying over $6,000 in credit card debt, the new scoring model — FICO 10 — is likely to hurt quite a bit, according to reports.
The Washington Post reports that about 40 million Americans could see their credit score drop dramatically, if they’re behind on late on any payments. Those who are timely and consistent with payments could see their scores increase by up to 20 points.
As many as 110 million Americans could possibly see changes, either positive or negative, to their credit rating, CNBC reports.
Regardless of how much the scores change, it will widen the gap between those with good and bad scores, reports The Wall Street Journal.
Why the change? According to The Washington Post, it’s because economists are worried about climbing levels of debt, particularly high personal loan balances, which have increased by over 15% in the last five years, according to Experian.