FICO 08 Is Scheduled For Release - Prepare Yourself NOW!

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Fair Isaac Corporation is scheduling FICO '08 for release on
January 10, 2008.


The primary reason for the planned switch to FICO '08 has to do with the forecasting powers of the new model. Fair Isaac believes that FICO '08 will do a better job at predicting the likelihood of default on a loan by making two changes to its existing model:

• Authorized Users - An authorized user is a person that is permitted by another account holder to use their account. Normally, this situation applies to a family member who is trying to manage credit for the first time, such as a college student. The new scoring model eliminates "piggybacking" which allowed individuals with bad credit to leverage the payment histories of "stronger" credit card holders by becoming an authorized user on their accounts.

HOWEVER...I have heard from an industry expert that "piggybacking" was the problem with FICO '08. Fair Isaac needed to reconfigure the scoring model and deal with the issues it had with "piggybacking."

Here is what I was told. Fair Isaac is going to eliminate "piggybacking" for those accounts that show different addresses. Accounts with the same address will not be affected.

Here's an example.

Parents have a student going off to college who is on their credit cards. If the student changes their primary address they will not have the benefit of their parents account. If the student keeps their primary address the same as their parents, they will still have that account show up on their credit report and receive all of the benefits of that account.

• Delinquencies - The second change in the scoring model has to do with payment patterns - especially those that are greater than 90 days late in making a payment. The FICO '08 model will be more forgiving to consumers that are in arrears in one area, but have a number of other accounts that are in good standing.

Your FICO score is determined by a number of factors. Mainly they are 1) Payment History, 2) Credit to Debt Ratio, 3) Credit Length, 4) Types of Credit, and 5) Number of Inquiries.