FICO Credit Score Changes Looming

Written by admin - 2 Comments

According to a recent article in Money Magazine, Fair Isaac is set to roll out a new formula for determining your credit score. Their goal is to better differentiate between “good risk” and “bad risk” borrowers, thereby providing creditors with a more realistic idea of your risk o defaulting. The good news here is that generally responsible borrowers will generally see their credit scores increase.

Here are some examples of the upcoming changes:

»Isolated delinquencies” will no longer have a major effect on your credit score. In other words, if you have a lengthy record of paying on time, a one-time slipup resulting in a 90-day late payment will have a minimal effect on your score. In contrast, routine late payments of less than 90 days will still have a deleterious impact on your credit score.

» Multiple credit inquiries in a short period of time, such as when you are shopping around for the best rate, will be weighted less heavily and thus have a reduced (negative) impact on your credit score.

» Having multiple different types of credit will help your score. You will be rewarded if you can show that you can handle multiple different types of credit, such as a combination of revolving debt (i.e., credit cards) and installment loans (e.g., auto loans or a home mortgage). If you have an otherwise solid credit record, then holding this sort of a mix of credit types will help your credit score.

Both Experian and TransUnion are expected to adopt the new credit scoring criteria soon. It’s unclear whether or not Equifax will follow suit.

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Published on February 28th, 2008 - 2 Comments
Filed under: Credit Scores

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Comments (scroll down to add your own):

  1. I’ve also heard that a new medical FICO score may be coming in the near future, for medical debt. If the health care crisis isn’t resolved with a new president, that may be bad news, especially for people without health insurance.

    Comment by emilyg — Mar 3rd 2008 @ 12:58 pm
  2. Of course “Equifax” will be the loophole that all shady creditors will use to judge consumer worthiness if fico and the 2 others adopt a slightly fairer scoring system. There is ALWAYS a loophole – count on it!

    Comment by Buubs — Nov 26th 2008 @ 5:24 am

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