FICO 2008- How the Latest Version of the Popular Credit Scoring Model will Affect Your Credit

Editor's Note: This article is an interview with Craig Watts, Public Affairs Director at the Fair Isaac Corporation.

There is a new sheriff in town. You may not recognize the name, FICO 08, but you should recognize its task--credit scoring. A FICO credit score is a number from 300-850 that is used by lenders and other businesses to determine credit worthiness based upon selected criteria. The higher your FICO score, the greater your chances are of qualifying for an attractive credit card rate. The FICO score was introduced in 1989. FICO 08 is simply the latest concoction.

I had the pleasure of interviewing Craig Watts, Public Affairs Director at the Fair Isaac Corporation, the purveyors of FICO. Craig offered some interesting insights into the new scoring model.

Mike: Can you elaborate on some of the changes affecting consumers in FICO 08?

Craig: FICO 08 scores provide greater flexibility regarding the negative effect of missed payments on a credit report. For borrowers who have an account that is delinquent, scores may drop less if the borrower has a number of other credit accounts in good standing. However, FICO 08 scores could drop further if the consumer's credit reports show multiple delinquent accounts.

Additionally, FICO 08 scores may penalize less severely a single serious delinquency that occurred recently on an otherwise unblemished credit history. On the other hand, the FICO 08 score will likely drop further if the credit report shows a pattern of multiple prior delinquencies.

FICO 08 scores will also be more sensitive regarding high credit card usage on your credit report.

Mike: Do you have recommendations for consumers to improve their FICO score?

Craig: Scoring recommendations remain the same for FICO 08. FICO 08 scores keep the same score range of 300-850 with higher scores indicating better risk. The score is still based entirely on credit history from the consumer's credit bureau report. Following the same good credit habits over time will produce a good FICO 08 score. For example:

  • Pay your bills on time
  • Keep your credit card balances low
  • Take on new credit only when you really need it

Improving a score's "predictiveness" means that some consumers' scores will change. However most people's FICO 08 scores will change little compared with their current FICO scores. Roughly half the population should see their scores either stay the same or go up at least slightly.

Mike: Who is currently utilizing FICO 08?

Craig: TransUnion began providing the FICO 08 score to businesses in January 2009 as the FICO Risk Score, Classic 08. In June, Equifax began offering the FICO 08 score to businesses under the name BEACON 09. FICO is working with Experian to make FICO 08 scores available to Experian clients as well.

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