FICO 10T is Changing the Game for Mortgage Lending
John Wines – Chief Strategy Officer – Atlantic Bay Mortgage Group
Why the FICO 10T model is a big step towards a more inclusive housing market.
Using the the most effective tools and models available is key when evaluating creditworthiness of a borrower. The FICO 10T model is an innovative tool positioned to transform how lenders and borrowers make decisions. Set to join the classic FICO model in late 2025, FICO 10T will be a game changer for the mortgage industry, especially in relation to affordable housing.
What is FICO 10T?
FICO, the company behind the widely used credit scoring models, updates its scoring models every five years to ensure its algorithms are analyzed to better predict risk and reflect evolving consumer behaviors. While the classic FICO model has been a cornerstone of the industry since 1989 and will continue to be used by lenders and borrowers, the introduction of FICO 10T marks a big move forward by incorporating trended data for the first time.
For mortgage lenders, FICO 10T can be used to assess credit risk more accurately when someone applies for a mortgage. The model’s ability to analyze trended data by tracking patterns in balance, payment, and credit utilization over time, allows lenders to make more informed decisions. As a result, this new resource will help make the borrowing process more stable, more flexible, and more accessible for first-time borrowers.
A More Comprehensive Model
The trended data analysis provided by FICO 10T also provides a more holistic view of the borrower’s financial history. By examining the borrower’s past 24 months of balance, payment and other credit utilization behaviors, lenders can better predict future credit behavior, leading to more reliable decision-making and fewer defaults. This enhanced predictability benefits not only lenders but also borrowers, who can now be evaluated more effectively based on their long-term financial habits.
At Atlantic Bay, we welcome the implementation of the FICO 10T model. Its enhanced accuracy, transparency and inclusivity will elevate our ability to serve a more diverse range of borrowers. By embracing FICO 10T, we can gain a more comprehensive understanding of our borrowers’ financial histories, and better support first-time and underserved borrowers in their path to homeownership.
One of the most compelling features of FICO 10T is its ability to include additional population segments in the scoring formula. By incorporating a broader range of credit behaviors, FICO 10T surpasses previous models in accurately assessing risk.
A More Inclusive Model
This development aligns with Atlantic Bay’s commitment to making homeownership accessible to more individuals and families. By capturing a deeper, more accurate picture of a borrower's financial health, mortgage lenders can offer financing solutions tailored to each individual’s needs, helping more people achieve the stability and security that comes with homeownership. This innovation strengthens the industry’s dedication to building stronger, more inclusive communities through accessible housing.
FICO 10T is particularly impactful for first-time and underserved borrowers, as it allows for a broader range of credits to be considered scorable. This enables lenders to diversify their customer base and offer mortgage opportunities to those who may have previously struggled to obtain credit.
How to Embrace the FICO 10T Model
Lenders wanting to gain a competitive edge as early adopters can prepare for the new FICO 10T model through:
Education: equip your teams on the trended data and its implications for credit scoring
Tech upgrades: prepare your technology systems for the data integration from FICO 10T; invest in new software, if needed
Communication: create targeted communication for consumers to ensure they are aware of the new model and how it might impact them
Borrowers interested in benefitting from the trended data model can prepare for the new FICO 10T model through:
Research: Understand how FICO 10T will view your data from the past 24 months
Stable spending: Maintain consistent spending habits as opposed to erratic swings in credit usage
Diversify credit: Having a strategic mix of credit (credit cards, installment loans, etc.) can work in your favor, as FICO 10T considers how you manage various types of credit over time
Bottom Line
Educating borrowers and industry professionals about the benefits of FICO 10T is a strategic movie for mortgage companies aiming to stay ahead of the curve. Early adopters of this model will not only enhance their competitive edge but also better meet the needs of modern borrowers. At Atlantic Bay, we are committed to leading the industry in leveraging this innovative tool, ensuring that our lending practices are as fair, accurate and inclusive as possible.