The credit scoring system is being tweaked again as Fair Isaac Corporation, developer of the FICO credit score rolls out a new model dubbed FICO 08.
The three major credit bureaus announced credit score packages of their own, probably having seen the success FICO was having in charging consumers for information on their credit scores. FICO, however, remains the product used by most lenders not only to grant credit but to set interest rates and other loan terms. FICO scores are also factored into credit decisions by insurance underwriters, cell phone, and utility companies and are sometimes used by employers to evaluate prospective employees.
FICO predicts that the new scoring system will help lenders reduce default rates on consumer loans between 5 and 15%. FICO 08 will supposedly go easier on consumers who make the occasional slip while coming down harder on those with multiple offenses. For example, it will give a slightly higher score than previously to a borrower who is late on one obligation but current on multiple other accounts. Those with several delinquent accounts could find their credit score has dropped.
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