FICO uses new credit scoring model - WTVM.com-Columbus, GA News Weather & Sports

ConsumerWatch

FICO uses new credit scoring model

By Zaneta Lowe  - bio | email | Twitter

COLUMBUS, GA (WTVM) -  After announcing it planned to launch a new scoring model well over a year ago, the new FICO 08 Credit Score is in use.

FICO reports the new scoring model is being used by the major credit bureaus as well as hundreds of lenders across the country.             

There are several changes consumers should be aware of concerning the new model.  In fact, some experts say FICO 08 could actually lower or raise your score as much as 50 points compared with the previous version.

How could this happen?    One potentially positive change is that under the updated scoring model, consumers won't see a ding on their score for small, missed payments.

"So there's going to be like a forgiveness plan for people that have traditionally paid on time and maybe were late with their utility bill one time," says Consumer Credit Counseling's Lisa Scrivner as an example.

Experts say consumers are also less likely to be penalized for any single delinquency if it occurred two or more years ago.   FICO 08 also looks closely at what's called "piggybacking."

That's basically when you become an authorized user on someone else's account to boost your score.

"There was a lot of fraud associated with that, people were selling bogus authorized user accounts," says Scrivner.  However, for those that do it legitimately, there shouldn't be a problem.

Experts say overall, payment history will still be important, as well as credit usage and limits.

"If they have a credit card and it has a $5,000 limit and you're at $4500,  that can affect your credit score negatively.  You need to only be at about 25 to 30% of your available credit limits," Scrivner says.

To get a free copy of your credit report, visit annualcreditreport.com.



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