New Credit Score Model May Help Consumers


FICO 8 Gains Wider Acceptance

Fort Lauderdale, Fla. –CitiCards, one of the largest U.S. credit card issuers, has recently announced that it was adopting the new FICO 8 Score method as key criteria for issuance of credit to consumers. FICO 8 was introduced in 2009 as an update to the then current credit scoring model issued by Fair Isaac Corporation which changed its name to FICO around the same time. It has taken more than 2 years for banks and other financial services providers
to really adopt the FICO 8 updates. CitiCards spent over 18 months validating the new score results before adopting it. They found that FICO 8 improved customer risk prediction and are now using the score in many of their lending decisions.

FICO 8 contains five broad factors that affect a credit score, including payment history, credit utilization, length of history, types of credit used and new credit opened. Moreover, within each of these categories are more detailed identifiers that can impact your credit score.

Stephen Marcus, President of A New Horizon Credit Counseling Services said, “While the range of scores from bad to good remains relatively unchanged with FICO 8, where you fall in the spectrum of credit scores could shift. The new model calculates delinquencies by type. For example a missed doctor’s payment will be scored different than missing your last three mortgage payments.” A New Horizon, a non for profit organization, offers Financial Education, Credit Counseling and Debt Management Plans to the public.

Another significant change is that with the former FICO model a single late payment could adversely affect your credit score. FICO 8 takes into account the number of late payments you make, and the impact shouldn’t be as great as it was before, although a single missed payment still results in an adjustment to your score.

Marcus said, “Another improvement to the scoring model is that it no longer gives the same high priority to collections accounts with less than a $100 balance. That means that a small unpaid bill won’t have the same impact it used to.”