FICO eight – Comprehending the “New” Credit Scores
Fair Co. and Isaac is introducing FICO eight, an improved scoring model created to help lenders make a more accurate assessment of risk when accessing applicants. In light of increasing amounts of delinquencies, along with declining recovery values (the amount a lender is able to recover once a reposed car is sold at auction), lenders have been trying to look for a better credit repair service [www.thedailyworld.com] model to predict the likelihood of a mortgage default. Based on Mortgage News Daily (1/7/08), Fair Isaac predicts that FICO 08 helps lenders reduce default rates on customer loans between 5 and fifteen %.
The fundamental elements which FICO evaluates in computing a credit score will always be largely look and feel the same. lenders as well as Creditors are going to continue to look at:
o Payment history: Has the customer regularly paid their accounts promptly in accordance with the conditions of their loan or perhaps credit arrangement?
o Amounts owed: How many users have balances, the amount owed on each and what proportion of available credit is being used.
o Length of credit history: Number of not long ago opened inquiries and profiles, the time since recent account openings and it is there a re establishment of good credit history?
o New credit: The number of recently opened credit profiles and credit inquiries are on file?
o Credit mix: How many and what kinds of accounts are opened?
The main difference with FICO 08 will be the fat these factors will carry. FICO 08 will more finely “slice as well as dice” info. Based on Credit Technologies Inc. “Each scoring model is split into scorecards, (also called Population Segments.) Today’s FICO design utilizes 10 score cards. FICO 08 offers 2 more, now dividing the population into 12 segments (eight for men and women with great credit and 4 for those with bad credit.) This could result in minimal modification of a consumer’s credit report possibly up or down “