How New Credit Scoring System Will Affect You

Last Revised on September 1, 2008

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There is a new math in credit scoring system because it has been changed, or experts say improved, to make it more accurate. Now this should affect everybody how easily they will be able to get the credit in the future, unless someone is filthy rich.
Instead of just FICO credit, now there is FICO 08. The new one is lot better though for it won’t be too strict if you make some tiny occasional credit mistakes. However, it is lot will be lot harder for those who repeat these mistakes one after another. This new system can help lenders reduce default rates on their consumer credit by between 5% and 15%, so says the Fair ISAAC Corp who manages the FICO system. About 90% of the consumer, companies and banking use FICO credit score.

The new FICO scores should be done updating by the spring 2008. But there is a big chance that some, if not many, lender will won’t fully use the system. Fico scores are supposedly still to remain in the same range from 300 to 850, with the higher score the better mantra.

The new FICO will continue to take consideration of the the same factors the used to like consumers’ level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to give consumers the right credit score.

“Consumers who are low risk will score better with the new FICO version, and consumers who are high risk will score lower,” says John Ulzheimer, president of consumer education for Credit.com, a personal-finance Web site. Higher-risk borrowers may find it tougher to get credit, while those with less-risky profiles — though they may have gotten approved for credit accounts in the past — will start to get better deals from lenders, he says.

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