FICO Score Changes More Forgiving
Aug 27th, 2009 @ 9:32 AM by Ben Meyer
Good news for those hoping to improve their credit. Changes to the FICO model that credit agencies use to determine your credit score is more forgiving for small credit blemishes, according to a recent article in the Wall Street Journal. The new formula, FICO 08, has been made available to lenders by the big three credit agencies; Experian, TransUnion and Equifax, since last month.
Unlike previous versions, FICO 08 will not ding your credit score for bills in collections originally under $100. It is also less likely to lower your scores for occasional missed payments, although those with a pattern of missed and late payments will still see their credit affected. The new model also tries to curb illicit “piggy-backing,” a process where credit-repair agencies have those with bad credit pay to add their names to accounts of those with good credit.
Although FICO 08 is available now, not all lenders are using it yet. Big holdouts include home lending giants Fannie Mae and Freddie Mac, though the Wall Street Journal reports they plan to adopt the new formula by the end of the year.
Ben Meyer is the Editorial Director of Loan.com
I think that FICO 08 is definitely a step in the right direction. I like the fact that FICO is at least seeming to take into account a little more human elements in computing the score. I think it would be very easy for them to not address the change in climate and rather want people to adjust themselves to how to go about fixing their score based on the older models.
I know that the effect isn’t going to be immediate. After all, you have no way of knowing what model your particular lender will use. I do think though its a step in the right direction and shows that FICO has good intentions. They seem to be committed to trying to provide the most honest and accurate assessment of a person’s risk to lenders.
That’s really all we can ask of them. We are all human, and its nice to know that they just might be as well.
Check out my blog on FICO 08 at thedebtgazette.com
The new changes are crap. I worked by tail off to increase my score 150 points in ten months. Then, I have to wait one month for my FHA approval. During this time, absolutely nothing changed on my report. I used my credit card and paid it off each month and I paid everything on time, yet my flipping score dropped 50 points and now I don’t qualify for a mortgage. This is crap!
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