New Fair Isaac credit scoring model coming

First off... as you can see... I started this blog over a year ago. Then let it go so long that Blogspot changed over to Google management, and I had forgotten my passwords! DOH!

But I'm back on the air, and plan to keep any and all abreast of real estated related issues and news.

And we'll re'enter the real estate blog world with some older news, but an issue that may have escaped you. Credit scores.

Fair Isaac, in response to the small percentage of subprime defaults that are making the higher percentage of news outlets, is changing their model for assessing FICO scores ... nicknamed FICO 08... sometime this summer. Your scores will still be reflected as numbers between 300-850. And still, da higher, da better. But how they decide those numbers is what is changing...

From the WSJ article mid-December (told you I was catching you up... belatedly)...

But the new model will more finely slice and dice the information in consumers' credit files to do a better job of separating the "good risks" from the "bad risks," particularly for subprime borrowers; those with "thin," or young, credit files; or consumers who are actively seeking new credit. "Those are the communities that lenders are most interested in" to determine credit risk, says Craig Watts, spokesman for Fair Isaac.

"Consumers who are low risk will score better with the new FICO version, and consumers who are high risk will score lower," says John Ulzheimer, president of consumer education for Credit.com, a personal-finance Web site. Higher-risk borrowers may find it tougher to get credit, while those with less-risky profiles -- though they may have gotten approved for credit accounts in the past -- will start to get better deals from lenders, he says.

FairIsaac elaborates just *how* they intend to get a better handle on default potential. And that's by removing authorized user accounts (a person using another's credit account... such as children with their own card for the parent(s) account) from consideration when determining scores. WSJ's Jane Kim described this as "piggybacking" credit.

FICO 08 also aims to curtail the growing business of allowing people to polish their credit by "piggybacking" on someone else's good credit history. In recent years, credit-repair Web sites have sprung up that arrange for subprime consumers to boost their scores by becoming authorized users on accounts held by strangers with better credit. When scoring a consumer, FICO 08 won't take into consideration credit-card accounts for which that person is an authorized user. But the move also will hurt legitimate users: People who give a credit card to a child or a spouse as an authorized user to help boost their credit score.

Never fails... there's always a catch to the hitch, eh? However the suggestion would be to change the account to a joint account prior to implementation of FICO 08, and dodge this bullet.

Perhaps the source summarizing the changes in down-to-earth consumer language is The Consumerist.

+ [means] situations where scores will rise,
- [means]situations where scores will fall

+ Mess up every so often
- Consumers who consistently mess up
+ Won't get dinged as hard when you apply for credit from multiple sources
+ Having a mix of credit types, like having a credit card, mortgage, and auto loan at the same time
- Spending near the limit of your total available credit
+ If you're 90 days late on payments on one account and your other credit accounts are in good standing
- 90 days late and you have other delinquent accounts
- Being an authorized user on someone else's account with good credit will no longer help your score

Short, sweet and to the point.