Fair Issac to Make Changes to Fico Score Formula
In a bid to make their credit scoring formula more effective, Fair Isaac, the company behind the Fico score, will make an adjustment to the scoring model.
While the change wasn’t clearly explained to the public because of privacy concerns, I was able to come up with some details surrounding it.
Fair Isaac spokesman Chris Watts said Fair Isaac currently divides the population into 10 segments and applies a unique formula to each group.
Watts said the new credit scoring system will divide the population further, into 12 groups, with eight for people with good credit and four for people with bad credit.
The change comes on the heels of another initiative to improve the credit scoring model, eliminating authorized users.
It will be interesting to see how dramatic the changes are, and if they affect certain types of financing such as mortgage, though I’m sure it will vary widely based on what “credit rating” group you fall into.
It sounds like consumers with bad credit may be penalized even further, although I don’t want to speculate until further details present themselves.
Regardless of the scoring model changes, consumers should continue to practice responsible credit use to ensure their credit scores remain strong (how to raise your credit score).
Related Topics:
- Fair Isaac to End Credit Piggybacking Practice
- Fico Score Founder Fair Isaac Revise Earnings
- Fico Score to Get a Makeover
- Fico Loses Trademark on 300-850 Credit Score Range
- Fico Score Founder to Miss Earnings Estimates
Posted Under: Credit News