Yesterday, Fair Isaac Corp. (creator of the FICO score) and TransUnion, one of the three major credit bureaus, rolled out the long-anticipated FICO '08 to lenders.
The new scoring model changes a number of calculations. It's more forgiving of one-time "slips" – for example, the impact of a late payment will be less for someone who is in good standing on multiple credit accounts. Conversely, FICO '08 will be harder on those will have less impact on your credit score, whereas "repeat offenders" will see credit scores reflect habitual delinquencies. Those with good credit should see a slight increase in their scores; those with multiple delinquent accounts will see their score drop. The score will continue to range from 300 to 850.
Equifax is expected to roll out FICO '08 in the second quarter. Experian, which is currently embroiled in litigation with Fair Isaac, is not disclosing whether it will implement the new FICO '08 model. However, Experian recently sent a letter of termination to Fair Isaac, stating that it will no longer allow MyFICO to provide Experian MyFico scores to consumers. (Experian will continue to sell consumers the PLUS and VantageScores, which are NOT the scores used by lenders.)
One major concession in FICO '08 – the scoring model will continue to count authorized users (such as children or spouses) on credit card accounts. An authorized user on a good credit account will get a credit score boost. Fair Isaac has purportedly tweaked the algorithm to prevent credit repair companies from gaming the system.
According to the Wall Street Journal, Fair Isaac predicts FICO '08 will improve the accuracy of lending decisions by as much as 15%. But it may be a while before the score is widely available to consumers, as lenders will be carefully evaluating the score and deciding whether or not to use it.
