You can expect BIG changes to your credit scores with FICO 08

Fair Isaac has finally released their much anticipated FICO 08 credit scoring model. This new credit scoring model has big differences from the previous FICO model.

FICO 08 is the first major change in Fair Isaac?s scoring model since the 1980?s. Fair Isaac predicts this new scoring model will better predict risk of default by 5-15% over its predecessor.

Many experts estimate it could actually improve the current risk model by upwards of 50%. FICO 08 was pushed to be released in 2009 in response to changing economical conditions.

FICO is used by most financial institutions so understanding the new changes are crucial. Many lenders will quickly be integrating this new scoring model into their underwriting systems.

Many of the underlying principles of FICO will remain the same. This includes the score range of 300-850 which will continue with the new model.

One of the most positive changes is that collection accounts with initial balances less than $100 will NO LONGER have an impact on the credit score.

Very small collections such as small medical bills will not be calculated into the credit score if the initial balance on the account was less than $100 at the onset of the reporting of the item.

The new scoring model will also have less of a score affect for consumers who are late in one area of their credit profile, but not late in other areas. So if a consumer is occasionally late on an auto account, the score change will be less than if that consumer was consistently late on their mortgage and credit cards.

The credit score impact of an authorized user account will also change with FICO 08. There will be no more score increases for certain forms of ?piggybacking?. This is when a customer with credit problems or no credit gets added as an authorized user to accounts of someone else with good credit to boost their scores.

With FICO 08 this is only permitted for the consumer?s immediate family.

If the consumer has too few accounts, closed accounts, or has accounts inactive, the damage to the score will be greater than its predecessor FICO.

FICO 08 now contains between 12- 16 scorecards estimated. This is versus the 10 prior scorecards that existed with the prior FICO model. These scorecards are mathematical models that are used to assign a credit score.

Each scorecard is specific to a particular industry. For example the Mortgage Industry Option Scoring Model uses its own scorecard and weighs past mortgage and installment history heavier than all other accounts while computing a credit score.

FICO will be a big upgrade for Fair Isaac. Most lenders and the credit bureaus are quick to implement this new model due to its increased ability to accurately predict credit risk.

For more questions on credit scoring and enforcing consumer credit rights visit www.PerfectCreditFast.com.