Credit News 2008: New FICO Credit Report Calculations

This is something that was in the news as early as 2008. This refers to new math of FICO credit scores that affects a person’s credit report.

These new FICO score calculation guidelines were designed to help responsible people.  The system by which this scoring system figures out credit scores has been altered.

This was done to provide some grace to responsible people who occasionally mess up and forget. This helps otherwise good people not be hit so hard when they try to apply for a car or home loan.

New FICO scoring guidelines include the following:

• If in the event you move and you miss payment of a last bill pertaining to household expenses (utility bill would be a good example) it could have gone to collections. These as well as unpaid library fines and other minor delinquencies are now overlooked.
• Regarding the above, FICO considers a minor delinquency to be a fine of $100 or less. If this refers to some old debts you have this new rule can help you.
• If you have any delinquency that occurred two or more years ago you are not likely to be penalized for it. This delinquency especially counts less if your credit report is otherwise (at least almost) spotless.
• There is more of a grace period with missed payments as well. You may want to check FICO standards out to find out how much time you have to make a payment. However, at least a few days late is not likely to matter as much nowadays.

The Effect on Consumers

The consumers who are not such a high risk credit-wise are likely to see their FICO scores raised some. People who are at a higher risk to lenders may see their FICO scores drop a bit.

Consumers should be aware that not all lenders have as of 2008 used the new FICO scoring model. Chances are by 2010 they will begin to but as of the time when these new scoring guidelines were being used they were not used by every lender.

However, this new FICO calculation system has one other advantage. It helps prevent people who try to use someone else’s name in order to clear up their credit.

This prevents deceptive use of credit that often is used to obtain a loan. For instance, there is a process called “piggybacking” which involves a type of practice as indicated above. It involves using someone else’s name.