FICO^® 08 to Impact 60 Million Consumers

The latest credit scoring model, FICO^® 08 is expected to launch in 2^nd Quarter 2008. According to Fair Isaac, the changes in the FICO 08 model will impact up to 60 million consumers.

This new algorithm will go easier on consumers who make the occasional slip while coming down harder on those with multiple offenses. Borrowers who are late on one account but current on multiple other accounts will see a higher score. Those with several delinquent accounts could have lower scores under FICO 08. It's also understood FICO 08 increases the penalty for consumers who use a high percentage of their available credit.

In addition to the overall changes in how delinquencies are “weighted”, there are two other significant updates in FICO 08,

Authorized User accounts will be ignored
Authorized user tradelines will no longer be included by Fair Isaac and will not impact the credit score. This change eliminates a credit repair tactic whereby consumers were being charged thousands of dollars to "rent" authorized user tradelines in an attempt to artificially improve FICO scores and defraud lenders.

The Addition of 2 New Scorecards
Each scoring model is divided into scorecards, (also referred to as Population Segments.) The current FICO model uses 10 score cards. FICO 08 adds 2 more, now dividing the population into 12 segments (eight for people with good credit and four for people with bad credit.) This could result in a slight change of a consumer’s credit score either up or down.

Credit Technologies will make FICO 08 available upon its release however, that doesn’t mean that the GSEs or every lender will quickly adopt/accept it. It will likely take some time for wide acceptance and as of yet, there have been no indications that any of the older models will be retired.
 

FICO^® is a registered trademark of the Fair Isaac Company

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