Updated FICO credit score rolled out

01.30.09
By Sarah Beldo

A new credit scoring system aimed at providing a more accurate picture of a borrower's risk was debuted by Fair Isaac on Thursday.

However, a report in the Wall Street Journal suggests that some time could pass before the average consumer is able to get a sense of how they measure up under the new rules.

TransUnion said it would be the first credit bureau to offer the overhauled system to businesses, which it will market under the name FICO Risk Score, Classic 08.

But some experts see roadblocks ahead. For example, consumer advocate John Ulzheimer told the news provider that certain lenders may not start using the new system until Experian and Equifax join TransUnion in offering FICO 08.

Also, lenders may be inclined to test out the new method on their business and loan portfolios before opting in.

So, what is different about FICO 08? Some things have stayed the same, such as the scoring range of 300 to 850.

But Fair Isaac says it has fine-tuned its analysis to present a more realistic picture of the risk posed by subprime borrowers and people with short credit histories.

For examples, borrowers who have a small number of negative items on their report - or whose infractions are relatively minor - will be given more favorable treatment than repeat offenders who have committed more serious missteps.

Meanwhile, collections with an original value of $100 or less will not be counted under the new system.

Fair Isaac also says it has introduced technology that will help lenders determine whether an authorized user of someone's account is legitimate - or is just someone with poor credit trying to use another person's borrowing history to get access to a loan.

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Fair Isaac has fine-tuned the FICO score to present a more realistic picture of the risk posed by subprime borrowers.