Latest from FICO: FICO 8–A Primer

Latest from FICO

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Latest from FICO: FICO 8–A Primer

UPDATE:  FICO  introduced yet another update in 2014.  The Latest from FICO is called FICO 9.  The newest version will go easier on medical debt than FICO 8.  Even more important it will ignore paid collections.  Most lenders will be slow to update so expect FICO 8 and previous FICO generations to be the prevalent model for a while yet.

In 2009 FICO announced the debut of its newest generation of algorithms designed to “significantly enhance the score’s ability to predict consumer credit risk.”  Lenders are analyzing and testing FICO 8 to help them convert to the new formula.  FICO stands for the Fair Isaac Corporation, the powerful supplier of credit scores to the vast majority of lenders.  How does FICO 8 differ from the FICO model it replaced?

Here is the Latest from FICO: FICO 8–A Primer

  • The changes will have a significant difference on only about 1/2 of the scores.  The difference should be around +or- 20 points in most cases.
  • It is more sensitive to high utilization of credit. It is more important than ever to keep your ratio of credit utilization at no more than 30% if you can.
  • It is more forgiving of an isolated late payment late by 30 days or more.
  • It treats numerous late payments more harshly.
  • Although authorized user accounts are still considered in scoring for better or worse, FICO claims to have substantially reduced the benefits of “tradeline renting” also known as “piggybacking”.  This is the process by which a person with poor credit gets added to the accounts of someone with better credit to artificially inflate their score. Not surprisingly,  FICO isn’t saying how they screen legitimate from illegitimate use of this practice.  I’m sure whether or not the people are related is part of this calculation.  A lawsuit resulted in some limitations being put upon FICO’s use of this tool.  It can be very discriminatory for a computer to decide what degree of relationship it may favor before it penalizes people.
  • Small balance collection accounts where the original balance was $100.00 or less will be completely ignored.

Different Names for FICO 8

Each credit bureau has a different brand name for the new FICO 8 model.  Don’t ask me why.  Many lenders are slow to change their software to accommodate this new model.  They simply continue on indefinitely with the old model and very few people know the difference.

TransUnion:  FICO Risk Score Classic

Equifax:  Beacon 09

Experian:  FICO Risk Modelv08

don’t be fooled by fako vantage scores.  they are not the same as FICO.    They are more lenient but few lenders use them.
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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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