HELPFUL TIPS

BBB® Advises: Your credit score is going to change

FICO 08 is coming Pensacola, Fla. (Feb. 20, 2008) Excerpts Courtesy of FosterFolly News 

The way consumer credit scores are calculated will be changing soon. In early spring, The Fair Isaac Corp. – creator of the FICO score – will be unveiling a new scoring model for determining credit scores, dubbed FICO 08. While the Fair Isaac Corp. is keeping their methodology for determining credit scores under wraps, your Better Business Bureau (BBB) is offering a few details and advising consumers on how FICO 08 could affect them in ways they may not have imagined.  

FICO scores – which range from 300 to 850, with higher scores being better – are based on consumers’ credit histories and reveal their risk for defaulting on loans. A good credit score is anything higher than 700. Average FICO scores for U.S. consumers are around 690.

The Fair Isaac Corp. explains that the new method is more forgiving of minor slip-ups and will more accurately predict a borrower’s risk of defaulting on loans.

FICO 08 will still take into consideration the same factors of a person’s financial history including indebtedness, length of credit history, and number of open lines of credit. The difference with FICO 08 is the weight these factors will carry.

Your FICO score might go up if: You maintain various lines of credit, such as credit cards, a car loan and a home loan, because it demonstrates your ability to manage different types of loans.

Your FICO score might go down if: You have many delinquent accounts. While a delinquent account has always had a negative effect on your score, persons with more than one delinquent account may see their score slip even more.

No more piggybacking

BBB notes that piggybacking has become a popular way for people with no credit or bad credit to increase their credit score. Piggybacking involves being added as an authorized user to an account maintained by a person with good credit.

BBB is alerting consumers that the flip-side is that credit repair services have cropped up that allow and encourage people to essentially “sell” their good credit to people with poor credit. In order to discourage this, FICO 08 will not consider accounts where the consumer is only an authorized user.

BBB encourages consumers to request a free credit report once every 12 months. Consumers can get a free report from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion, by visiting www.annualcreditreport.com or calling 1.877.322.8228.

For more information and reliable advice on being a responsible borrower, start with bbb.org.