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.