New FICO Score System: What You Need to Know

Wall Street Journal:

Fair Isaac Corp. is rolling out its new-and-improved FICO score, but it's likely to take a while before consumers see how they stack up under the new system.

On Thursday, Fair Isaac and one of the three major credit bureaus, TransUnion LLC, will start offering the revamped score, dubbed "FICO 08," to lenders. Equifax Inc. is expected to follow in the second quarter, while Experian Group Ltd. declined to comment due to pending litigation with Fair Isaac.

The new score is supposed to do a better job of predicting borrower defaults, be more forgiving of one-time slipups and take a harder line on repeat offenders. The score, which will still range from 300 to 850 -- the higher, the better -- is fine-tuned to do a deeper analysis of subprime borrowers or those with "thin" or young credit histories, according to Fair Isaac. More consumers with accounts in good standing should also see their scores increase slightly, says Tom Quinn, vice president of global scoring solutions at Fair Isaac. Overall, Fair Isaac predicts FICO 08 will improve the accuracy of lending decisions by as much as 15%.

Read the whole story: Wall Street Journal

Comments

[syryn22]

I have always believed that FICO's existence is just to allow banks the justification to charge high interest rates and come up with loan terms that only benefit them. FICO illustrating someone's credit worthiness? Yeah right! My score is in the high 600s and it took so long for it to get to that point. My friends who have 700s or even 800s has a huge amount of debt that I am not comfortable with carrying by myself. I am 29 years old. When I was 18, I defaulted on a student visa credit card and a mervyns store card. I have paid these items off some time ago and my score still suffers for it. I do not think it is fair. I pay my bills faithfully on time and I am stable (I own a home and have worked in the same industry for ten years). I do not understand how one little score can speak volumes of my credit worthiness. Sometimes I wish we could all rail against the banking industry. It is unfair how they continue to rape us individually and collectively every single day of our lives.

[loki]

FICO scores really had nothing to do with the mortgage problem anyway, so why change it? It was the fact that everyone ignored FICO is what caused the problem. No Doc loans, and other scams that were allowed to be used by greed driven banks and lenders, and stupid borrowers who saw someone would loan them money and not worry about their 27 bankruptcies or bad credit , so they jumped on it like a Wealthy CEO on a tax break.

[isee61]

The FICO score is a I love debt score.

If you have no debt, your FICO score is zero.

The only way you can have a FICO score is if you go into debt. that is how they track yor credit worthiness.

I you save your money and buy stuff with cash, you don't have to go into debt to get what you want.

My husband and I have been paying off out debt for the last fyear and a half and will be debt free by the end of the year (thanks to Dave Ramsey's Plan) and my credit FICO score will be A#1. After we pay off our morgage and live a debt free like and never borrow money again, My credit score will be Zero and I can't wait for that day.

but my husband and myself will no longer use credit to do anything, but to have a morgage. other than that why need a credit score?

The FICO score is really dumb and you have to go in debt to have one. Count me out!!!

[loki]

Problem is without credit, and a credit card, you wont be able to rent a car, reserve a hotel room, buy airline tickets. And dont think a Debit card is like a credit card just cause it has the VIsa or MC logo on it. Its not and many places have different qualifications than credit cards have. Its sad, but there are many things that you cant do without a credit card. I think they design it that way to force you to get credit .

[darleneslee]

I started on a road path of being debt free and was quite happy not owing anyone. I would use my debit card to make purchases. It was only when I wanted to rent a car that I ran into the credit card hassle. They even would take a check and two current utility bills. Who would rather take a check over guaranteed money in the bank. They could easily have put a hold on the money in the bank.

[vippy]

This is so true. I always paid cash and I have no FICO Score when I checked on mine. This system stinks. I guess if you have a lot of debt and keep paying then you are A-Okay with them.

[ConcernedAboutRFuture]

The credit score scam is just another tool of the wealthy.

Did you know that if you go shopping for a car, and are considering buyin one, every time a salesman looks up your credit to see what kind of "deal" he can get you, it LOWERS YOUR CREDIT SCORE? That's right... an educated consumer who shops around has his or her credit score lowered every time someone looks at their credit.

ABOLISH credit rating and go by SALARY!

[Deborah]

And all of the people who have lost their jobs, homes, cars, and way of life will not be able to get a loan for 7-10 years for ANYTHING .

The banks have all super tightened their standards for lending money. The people who have been hurt the most by this bank created economic crisis will not be able to clear their credit ratings, causing this economic slowdown to last even longer.

[1liberalconspirator]

If the credit scoring system was actually even remotely accurate or had any predictive ability this entire problem would not have occurred. These changes after the fact won't change the inherently flawed nature of this credit scoring system. It is hilarious that they are trying to pretend that they have a basis in reality.

People have been predicting that the credit reporting agencies and these scores would lead to some sort of major disaster for DECADES.

[AnnfromCA]

No, what people need to do is disengage from credit scores entirely.

Remove the stinger.

Pay cash.

[StephenJK]

pay cash for a house or car? yeah, ok.

[jerseymaiden]

This sounds like yet another way for the credit companies and the banks to dictate tthe terms of absolutely everything of any importance without us having any recourse, any power, any real idea of what they know, or any way to fight it! It's a completely stacked deck. This sounds like bankruptcy "reform" -- just making it harder for people to do ANYTHING. Why do these creepy companies like Fair Isaac and the super-secretive credit reporting agencies, where you can't even get a human being on the phone, even exist?!

[1liberalconspirator]

Because the big banks wanted it to exist. The rates of bankruptcy, defaults and foreclosures have steadily increased as these systems have grown in their usage.

Good job FICO!

[cylindar]

Well I hate to say this but the whole scoring system is a scam and should be treated as such. I first became aware that the system was fixed when I recieved a notification from Wells Fargo that said that I had paid my bills on time and that basically they were not making any money on me so they dropped me. What a laugh. And this is only the tip of the credit and scoring scam.

[roald]

So how does the horrendous treatment you received have anything to do with the credit scoring system?

[FaceYourFears]

So true

[SCG]

You can thank Bill Clinton for this.

[roald]

OK. A scoring system that better reflects the chance of default sounds pretty good to me.

[StellaRay]

I suspect these new FICO rules will end up making it more expensive for the middle class to access loan money. And those who never had to rely on a FICO scores to access billions---every bailed out corporation----will make more money on the mistakes that caused the crisis we find ourselves in.

Not really so unbelievable in a country where the banking industry that just gobbled up enough of our treasury to put my son's future at risk, gave out billions in bonuses as their ships sunk.

[gjohntheterrible]

for those of u looking to purchase a home below 280K look at an FHA loan

[harriettubman]

They worry about credit scores so bad but can't even prevent identity theft. Any time someone goes into a bank with a signature that's not yours you'd think a red flag would go up.

[magibrotherhood]

The banks should be more worried about R.I.C.O.

[chayefsky]

I couldn't care less about credit scores becuase i think that is also a racket. i believe these scores are manipulated and do not reflect a consumer's true credit history. Just another disgusting financial scam.

[harriettubman]

Me too. It's nothing but a racket. How can something be called structured when people who pay off credit cards are penalized; if you have no balance on your credit cared, you're penalized. Now they're saying if you pay the minimum, you're penalized. If too many companies look into your credit report, you're penalized.

Everybody has a racket--the Nielson ratings and the 3 credit agencies--all rackets.

[wrenchdevil]

They ARE a racket..however, the unfortunate truth is that if want to buy a home, or an automobile, your at the mercy of the FICO scam. That's why I fight back, contesting every single ding on my report, and getting negative tradelines disappear..I try and beat them at their own game. It can be done, but it tales effort.