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Come late January or early February 2009, a new credit score will replace the old FICO credit score.  Its new name, the FICO 08, will continue to range from 300 to 850 as did the current (classic) FICO score.  There are currently two main types of credit scores, one being the FICO score and the other is the Vantage credit score.  In 2006, the three credit bureaus were sued because of unfair and uncompetitive practices that had harmed the FICO brand because of its use of the Vantage score.

Transunion will be using the new FICO 08 come January 2009.  Equifax will also use the new FICO 08 coming in the spring of 2009.  The last of the three big bureaus, Experian, will be waiting to use the new FICO 08 until the lawsuit is resolved.

The new FICO score was created with the intention of meeting the demand by consumers, especially since there has been increasing defaults on mortgage payments and late payments to creditors.  The new and improved FICO score will provide for the consumer a better way of analyzing their risk.  Used mostly by lenders to grant credit and to set interest rates, the FICO scores are also used by insurance underwriters to factor in their credit decisions.  Creditors are always analyzing whether or not the borrower will be a bad risk to their investment.  The new FICO scores will paint a better picture of the borrower’s credit history and will be a better predictor of whether or not the borrower will be a financial problem.

In some cases the FICO scores are used by employers to evaluate prospective employees.  The new FICO scores may see a slight increase compared to the old FICO scores.  Regardless of this slight change, many with poor credit history will inevitably see their credit scores decrease as they fail to pay their bills on time.

The new FICO scores will be less harmful to those who have had a single serious credit incident, such as a charge-off or repossession, as long as their other active credit accounts are in good standing.  Consumers with several delinquent accounts will surely experience a drop in their FICO score.  As long as you have a moderate amount of credit inquiries on your credit reports, you should generally be fine.

You have heard of a FICO score.  Your FICO score may have been the reason you did not get a loan.  Maybe you got the loan, but you received high interest because of your FICO score.  While it would be nice to think a score would not have a huge impact on your financial health, your FICO score does in fact have a direct impact on your finances.   You want a good FICO score so you can get loans at good rates and get approved for the things you need. How do you know if your FICO score is good enough?

First, you need to understand what your FICO score is based on.  Your score comes from information on your credit report.  A formula is used in order to get the score.  The score is figured by calculating payment history, amounts owed, length of credit history, new credit, and types of credit used.  Payment history and the amounts owed actually have the biggest impact on your score.  The other items also have an impact, but if you have a bad payment history or if you owe too much in credit, it will be incredibly difficult to overcome those two things, as they will have a large impact on your FICO score.  Next, banks and other lenders will take the FICO score of the individual and assess the risk.  FICO scores can range from 300 to 850.  On average, most people have a FICO score in the high 600s.  Those who fall above that range will be considered low risk, while those below that range will have a difficult time getting a loan.  If you find your FICO score has slipped down into the mid to low 600s, or even worse, the 500s, you will need to make adjustments in how you use your credit.  The idea is to keep your score high enough where you can get lenders.

In order to get your FICO score, you can visit www.annualcreditreport.com and get your free credit report along with your FICO score.  Once you have discovered your FICO score, you will then need to understand how that score will affect you.  First, of course, your score affects your ability to get a loan.  That is not the only way a FICO score can affect you, though.  If you do not have a high score, it will be very hard for you to get a signature loan.  You will likely have to have collateral present in order to get a loan.  Not only that, but it will be hard for you to get a job in a financial institution.  In addition, many jobs that are not related to money will not hire people with a low credit score.  Those who have good FICO scores can save a great deal of money in interest, and they often do not have to go through as much paperwork in order to get a loan.

It is necessary to know what your FICO score is.  That knowledge can help you keep your credit healthy.  You want to be able to use your credit when you need it, and when you have a good credit score, it will be available to you.  Thus, make sure you are aware of your FICO score.  You need to know what your score is and what needs to be done to improve upon the score.