FICO rating in the credit market goes down

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For decades, almost every consumer loan decision revolved around a three-digit number – the FICO credit rating. This is changing.

FICO has long dominated the consumer loan market, rating roughly 200 million U.S. consumers, which are used by a range of lenders to evaluate credit card, auto, and mortgage loan applicants. For borrowers, higher scores can mean larger loans and lower interest rates.

But powerful forces are joining together to challenge his dominance.

Major lenders are moving away from FICO, according to people familiar with the matter. Capital One Financial Corp. and Synchrony Financial do not use their scores for most consumer lending decisions. They become less of a factor in some of the underwriting decisions at JPMorgan Chase & Co. and Bank of America Corp.

Meanwhile, a key financial regulator is urging banks to reduce the focus on credit ratings in efforts to expand access affordable credit. And home finance giants Fannie Mae and Freddie Mac are considering allowing lenders to use different points when evaluating mortgage applicants.

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