Fair Isaac has released their much anticipated FICO 08 scoring model. This new credit scoring formula has many differences relative to its predecessor 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 this figure to be as high as 50%. FICO 08 has been released in 2009 in response to changing economical conditions and the demand for a better risk model.

FICO is used by the vast majority of financial institutions so understanding the new changes are crucial. Many lenders will quickly be integrating this new model.

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 best changes is that collection accounts with initial collection balances less than $100 will NO LONGER have any impact on the credit score.

Very small collections such as small medical bills will no longer have an affect on the credit score if the initial balance on the account was less than $100 at the onset of the account on the credit report.

The new model will also reflect less of a score affect for consumers who are late in one area, but not late in other areas on their credit. 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 auto, mortgage, and credit card accounts.

The effect of an authorized user account will also change with FICO 08. There will be no more ?piggybacking?. This is when a customer with challenged credit gets added as an authorized user to accounts of someone with good credit to increase their scores.

With FICO 08 their will only be a score improvement for authorized user accounts 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 an industry. For example the Mortgage Industry Option Scoring Model uses its own scorecard and weighs past mortgage history heavier than all other accounts while calculating 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 scores and the enforcement of consumer credit rights visit www.PerfectCreditFast.com.

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