There’s a new Recipe for cooking up a hot pot of FICO

There’s a new Recipe for cooking up a hot pot of FICO

WhiskMrs. Fico who cooks up credit scores for millions of Americans is changing her recipe — and that could affect how you get credit in the future.

Fair Isaac Corp., maker of the popular FICO credit score used by most lenders, says its new scoring model will do a better job predicting the likelihood of a borrower defaulting on a loan. Dubbed FICO 08, it will be more forgiving of occasional slips by consumers, but will take a harder line on repeat offenders. Fair Isaac predicts its new system will help lenders reduce default rates on their consumer credit by between 5% and 15%.


FICO 08 is a product of vendors looking for ways to better underwrite their “clients” due impart to the recent subprime crisis and individuals ability to repay debt. Sign of delinquencies have spread into other areas of the consumer market.  Consumers could start seeing the new FICO scores by the spring, though some lenders may take additional time to test the system to see how it works with their business and loan portfolios. Fair Isaac, which last revamped its scoring model earlier this decade, says it is accelerating its FICO 08 roll-out, partly in response to lenders’ demand for better risk-management tools.

FICO 08 also aims to curtail the growing business of allowing people to polish their credit by “piggybacking” on someone else’s good credit history. In recent years, credit-repair Web sites have sprung up that arrange for subprime consumers to boost their scores by becoming authorized users on accounts held by strangers with better credit. When scoring a consumer, FICO 08 won’t take into consideration credit-card accounts for which that person is an authorized user. But the move also will hurt legitimate users: People who give a credit card to a child or a spouse as an authorized user to help boost their credit score.


For detailed information on FICO 08 visit this new credit scoring system.

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