What is the FICO Resilience Index?
In today’s COVID crises, the major global population gets affected in several ways: financially or physically. Not only people, but the global economy in this pandemic also damages a lot that results in unemployment, higher inflation rate, etc. This is the time when creditors work to support borrowers. When there is a lot of financial stress that majorly brought the economic crisis, lenders or creditors reduce their credit risk to a great extent using smart tactics.
In such a case, it is good to rely on a tool that can more precisely predict a borrower’s strength to recover from the future economic downturn. The new FICO Resilience Index is a feature-rich tool that helps creditors to prepare for a time of economic crisis.
Let’s discuss this tool-
What Is the FICO Resilience Index?
The FICO Resilience Index is a new analytical tool that measures the consumer credit risk in the future economic crisis. It is considered that a numeric score is given to each person. This score indicates creditors about if a person can continue paying their bills as agreed in the future economic disruption.
In simple words, this tool is basically used to check the creditworthiness of an individual in a tough time. The FICO Resilience Index ranges from 1 to 99. The lower FICO Resilience Index score is considered better.
The Index features the following ranges-
1–44: More resilient to changes in economic conditions
45–59: Moderately resilient to changes in economic conditions
60–69: Sensitive to changes in economic conditions
70–99: Very sensitive to changes in economic conditions
These ranges clearly give you a clear picture of how good or bad creditworthiness you have in the time of pandemic or recession. For example, let’s say you have a FICO Resilience Index of 15. It means there is a high probability that you can pay bills in tough economic times. If your score is 80, it means your creditworthiness is low.
How Is the Resilience Index Different from a Credit Score?
Most people get confused between the two terms: FICO Resilience Index and Credit Score . A credit score shows if a person can pay their bills as agreed at any time, whereas the Resilience Index indicates if you can pay your bills in the economic downturn or not. There is a minor difference between these two terms. It’s all about the time factor that makes them different from each other. CPN tradelines or other methods used for credit score recovery are also the same for FICO Resilience Index.
Is the FICO Resilience Index Helpful for You?
When FICO Resilience Index was first introduced in 2020, it was all-new, and organizations are unaware of this index tool. However, later on, many companies or organizations show a high interest in integrating this technology into their lending processes. With the consistent rise, consumers were also inclined towards this index and started applying for the same. Creditors consider both credit score and index while approving the application.
So, now you know what FICO Resilience Index is and how it is different from a credit score. Here we have covered everything about this topic that will help you in the future.