Changes to FICO
May 5, 2008
You may have heard that the credit agencies such as TransUnion are chaning their credit score policy. Well, now it seems as if the old classic FICO is planning some changes as well.
Fair Isaac, which is the long name for FICO, is planning its own changes in the next year with FICO 08. The new system of scoring is designed to better predict creditworthiness and should benefit consumers who have many accounts and have demonstrated that they pay on time. At the same time it will penalize habitual late payers.
One of the major changes that may affect many consumers is that FICO scores will no longer take into account authorized users. For example, in the past, college students who built credit by being an authorized user on their parents’ credit cards were allowed some benefit as to their own credit score. That will no longer happen.
Matt Fellowes, a scholar at the Brookings Institution and a professor at Georgetown University, recently said that consumers need to realize the importance of their credit scores. They should also take all the measures that they can to make sure that they have the highest scores possible.
Consumers can do this by taking advantage of free credit reports and by carefully reviewing them to ensure there is no inaccurate information in them and to make sure that helpful information is not missing. It is also a good idea to look at a current report prior to applying for new loans.
Consumers should always keep in mind that they have the right to dispute inaccurate information on a credit report. This can help raise the score as well as show future lenders who you really are in relation to your loans.