Basics of FICO 08- "Very Nice Green Mortgage Group"

Basics of FICO 08- "Very Nice Green Mortgage Group"

borat11.jpgThe new credit formula announced by Fair Isacc deemed FICO 08 is expected to make its way into the credit scoring process some time in 2008. At Green Mortgage Group as of today we still haven’t seen any change on the way credit is scored and show no affect on our clients ability to obtain credit from lenders but we do have some new information on how FICO 08 calculated. Here is how current FICO scores are calculated:

Payment History (35% of score)

  • Amounts Owed (30% of score)

  • Length of credit history (15% of score)

  • New Credit (10% of score

Types of credit (10% 0f score)

Changes planned in FICO 08 model

The main reason for the change has to do with the forecasting powers of the new model. FICO 08 is expected to do a better job at predicting the likelihood of default on a loan by making two changes.

  • Authorized Users Or “Credit Piggybacking” – where an authorized user is someone permitted by another account holder to use there account is coming to an end. The practice where individuals with bad credit leveraged someone with strong credit piggybacking there good credit history.

  • Delinquencies- Payment patterns will be taken more into account. FICO 08 will be more forgiving if a consumer has made a mistake on one account and all other accounts are in good standing.

How will FICO 08 affect your credit score? It should be a benefit overall if you have one account in errors but have a good overall credit portfolio. This will help lenders going forward especially after the tightening of credit guidelines following the recent subprime crisis.

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