Executive Summary: Milliman FICO® Score 10 and FICO® Score 10 T Model Assessment June 2023

Following the Federal Housing Finance Agency’s announcement late last year that FICO® Score 10 T has been validated and approved for use by the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, a new model assessment from Milliman evaluated the performance of the FICO Score 10 T model compared to the classic FICO® Score, the credit scoring model currently in use by the GSEs.  

Using a data set reflecting the credit behavior of nearly 2 million mortgage borrowers between April 2018 and April 2020, the independent experts at Milliman examined the potential impact of new credit scoring models for borrowers, lenders, and investors. The Milliman analysis found “that the credit scores produced by the FICO Score 10 and FICO Score 10 T models provide an improvement over [classic FICO Scores] in several key areas.”  

Here are three key findings from the assessment:  

1. FICO® Score 10 and FICO® Score 10 T could help more consumers qualify for mortgages.  

• Milliman concludes that the newer and more predictive FICO Score 10 and FICO Score 10 T models will help prospective borrowers “receive a more accurate underwriting evaluation, leading to a wider choice of potential lenders, an improved chance of loan approval, and more appropriate terms of the loan such as interest rates, down payments and fees.” As a result of this enhanced predictiveness, “mortgage originators and investors may be able to […] expand automated approval to include borrowers with a lower credit rating relative to existing requirements.” 

2. Trended data could help some borrowers qualify for more favorable terms.  

• While the Milliman analysts found limited differences between FICO® Score 10 T, which uses trended data, and FICO® Score 10, which does not, they concluded that “FICO Score 10 T is more willing to put individuals in the highest grouping (800-850), displaying the benefit of trended data.” In other words, FICO Score 10 T’s inclusion of 24 months of credit data can help consumers at the high end of the credit score range demonstrate their responsible credit behavior over time and ultimately qualify for more favorable loan terms.  

3. Despite the improvements offered by the newer models, classic FICO® Scores continues to offer a reliable baseline assessment of credit risk.  

• Milliman notes that when comparing the migration from classic FICO Scores to FICO Score 10 and FICO Score 10 T, up to half of borrowers “stay within their original credit score cohort,” and when there is movement, “it is generally only one cohort above or below their initial score.” The classic FICO Score continues to reliably serve the needs of the GSEs during this transition period, providing the mortgage industry with an independent and predictive tool for evaluating potential homebuyers. 

To read the full assessment, please visit: https://www.fico.com/en/latest-thinking/white-paper/fico-score-10-and-fico-score-10-t-model-assessment.