FICO 08

With the changes in the market place and the shifting attitude of consumers towards plastic over cash, Fair Isaac has deemed it necessary to make a few changes. Fair Isaac or FICO is responsible for doling out consumer credit scores when can pretty much make or break a consumer searching for a mortgage, a loan, and even employment.

FICO’s new model is set to debut in a few months but many consumers and lenders are getting ready for the change now. FICO will keep the scale in which the credit scores appear the same. Which means consumers can still expect to see a number ranging from 350 to 800 which the higher the number reflecting the better score.

Many find that FICO 08 will be far more forgiving of consumers then the previous model.

The traditional FICO method of scoring credit looked like this:

• Diversity of Credit- took up 10% of the overall score
• Payment History- took up 35% of the overall score
• Credit History- took up 15% of the overall score
• Owed Amounts- 30% of the overall score
• New Credit- 10% of the overall score

It is important to know what your FICO credit score is as it is used by many lenders and banks to determine several fees and rates. A high score reflects positively on your ability to make payments on time and to use credit smartly. Consumers are able to retrieve a credit report form the big three credit bureaus yearly and should not hesitate to do so. The credit bureaus, Equifax, TransUnion, and Experian are used to keep track of the credit scores and of what impact these scores.

Equifax and TransUnion are expected to implement FICO 08 as soon as possible. Experian, however, as opted to withhold that action until the lawsuit between FICO and the bureaus are resolved. The lawsuit states that VantageScore which was developed by TransUnion, Equifax, and Experian harm the FICO brand. Consumers should keep this in mind should they request a credit report in an effort to see their new FICO 08 credit score.

Many are hopeful that the new scoring method will, in fact, boost credit scores. This is since FICO is loosening a few of its policies. Many actions that were once extremely harmful to consumer’s credit are now not as bad. Though there are actions that are now considered worse.

FICO 08 is taking aim at piggybacking credit card accounts in an effort to boost credit scores. This practice was exploited heavily in 2007. Consumers with bad credit would assign their names to credit cards held by consumers with good scores. The result would be a boost for those piggy backers. FICO 08 will ignore such actions meaning that piggy backers will no longer benefit.

FICO 08 will no longer view multiple credit requests as harshly as they once did. This reflects the changing of times since many consumers find that using credit cards are preferable to using cash. Along with this change, FICO 08 will no longer punish those consumers as harshly if they fall behind on one payment as long as the other payments are kept up to date.

Overall, FICO 08 is a needed change and promises to help many consumers.

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