How Can I Raise My Fico Score? New FICO-08 Will Not Help

Fair Isaac Corporation, the originator of the FICO score, is reworking the credit scoring model and is being called FICO 08.

The new scoring product was announced sometime ago, but wasn’t fully completed  for release. A demand by lenders facing consumer delinquencies, and rising foreclosures, have prompted Fair Isaac Corp to announce the product will be rolled out in spring of 2009. 

It is hoped that the new model will provide a better criteria for analyzing risk in this time of financial institutions continuing to spiral downward.

The 3 major credit reporting agencies have all made it known they have credit score packages similar to FICO.

It may be due to the fact they are aware of all the money FICO is making from charging consumers for the credit scores.

FICO still remains the leader for most lenders to set terms on loans,  interest rates, and determine if a consumer is a credit risk.

Credit is only 1 of the components FICO is being used for, employers are screening applicants, cell phone companies, insurance companies, and  utility companies use it to determine down payment amounts, and set rates by tiering applicants.

FICO’s new system is said to better assist lenders in reducing default  rates on loans they write, by approximately 5 to 15 %.  Consumers with a small blip on the report will by given a pass on the item, while a consumer with many dings will be met with harsher criteria for loans.

Some of the older criteria will still be used such as:

· Length of credit history
· Payment history
· Debt to available credit ratio
· Amount of debt
· Types of debt (mortgage, credit cards, etc)
· Excessive applications for new credit

A value will be placed on the types of debt carried; they are looking for a good mix of consumer, installment, and revolving accounts.

The basics for the new FICO 08 come down to the following new elements being used for calculation of scores:

 1. Fico 08 eliminates the “Authorized User Status” on credit cards. This is where someone with a strong credit score authorizes a user on the card. Also known as “piggy backing”. This would have enabled someone with a weaker score to enjoy a higher credit score. Parents did it for children, husbands did it for wives, and some even rented their scores for money, since once an authorized user is added, their score increases accordingly to the card owners credit strength. These types of accounts will no longer be taken into consideration in determining credit scores.

 2. Consumers with a slip up on their credit report, but with other accounts in good standing will be overlooked.

 3. FICO 08 will award more points for the differing types of accounts as stated above, it shows they can manage payments on various types of credit obligations.

 4. Those consumers how use a higher percentage of their overall available credit will also be penalized. Companies and consumers have protested about the changes stating it will affect the few people that don’t enjoy the security associated with a good credit score.

Those protests state the following:

· Lack of Transparency about how scores are calculated
· Minorities are unfairly penalized by the system
· Anger being lodged against the elimination of     “Authorized Users”
· Unduly penalize women

New credit borrowers will have to establish their own accounts to build a credit score, read my Credit Repair Story to see how you can accomplish this feat.

For my personal recommendation for credit repair advice, and credit repair online...

Thanks,
Mike

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