New FICO Score System: What You Need to Know

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%.

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