Your FICO Score Gets A Makeover

Your FICO Score Gets A Makeover
  • Opening Intro -

    In life, there are two things you can be certain about: death and taxes.

    While you only die once, you'll be paying taxes over and over and over again.

    Sometimes death can seem more appealing than the two!


Your Credit Score, Courtesy of Fair Isaac

Another certainty in this life, at least to for the American consumer, is their credit score – what is known as a FICO score. The Fair Isaac Corporation score is used by the three major credit reporting bureaus which are: TransUnion, Equifax, and Experian. That score will help lenders determine whether you will receive credit and, if so, at what terms. The higher your score, the better the chance you’ll be approved for a loan and at a favorable rate.

This week, Fair Isaac rolled out a modified version of their credit score, this one dubbed FICO 08. TransUnion is the first of the credit reporting bureaus who will use the new FICO method for calculating credit scores followed by Equifax in the second quarter. Experian is currently in litigation with Fair Isaac over another matter, so we don’t know when they’ll include with the new methodology.

More Accurate Predictor of Problem Borrowers

Supposedly, the new score will be an improvement over the way that the old one was calculated, as it will help creditors do a better job of predicting borrower defaults. In addition, it will be more forgiving of one time slip ups, but it will come down harder on repeat offenders. Scores will still range from 300 to 850 and Fair Isaac is expecting an improvement in lending decisions by as much as 15%.

Consumers may not notice much of a change for awhile, especially as many lenders use the score as only part of their methodology for determining whom they will lend to and for what terms. Some analysts believe that many mortgage lenders will not use the new calculation method until all three credit reporting bureaus are using it. Oftentimes, lenders will obtain credit scores from all three to determine one median score.

Get Your Free Credit Reports

For consumers, now is a good time to pull your credit reports to see if they are accurate and correctly reflect your personal information. Mistakes can impact your credit score, but they generally will only be fixed if you catch them. Thanks to an act of Congress, you can get free copies of all three credit reports at If you want you credit score you’ll pay a nominal fee for that service, something you can do when you order your reports.


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Categories: Credit Reports

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".