Your FICO Score - New Parameters

People often worry about Big Brother watching us, but don’t give a second thought to their credit record. Well, your credit history is the foundation of many things impacting your life. In fact, your financial profile can be boiled down to a FICO score.

Fair, Isaacs and Company are the party responsible for bringing us FICO. The score is an attempt to reduce our credit histories down to a single number that tells lenders if we are a good risk. The big news is the FICO calculation has changed.

Any person borrowing significant funds has run into their FICO score at one point or another. You might think you know everything there is about the FICO, but you don’t. This is because the calculation just changed.

So, how exactly is FICO changing? Is FICO still, well, FICO or is it something else? Well, it is still the dominant credit calculation used by lenders, but the factors involved in coming up with the score have changed.

The weight of transgressions in credit has always been a murky area with FICO scores. Many believed the weight given even to one late payment was far too much. After all, is one late payment really an indicator of a bad credit risk?

Fair Isaacs appears to have taken this one late payment criticism to heart. The new calculation process does not hammer a borrower who has one late payment. On the other hand, it reduces the FICO scores of multipayment problem borrowers even more.

Another change is the removal of the old authorized user trick. To help build up credit scores, people would often authorize another person. This was meant to be done from parents to kids, but was exploited heavily. It has now been removed.

The length of time you have had credit is now also given more value. This is apparently because the longer the record, the clearer the picture on what type of borrower you are. Open credit accounts early whenever possible.

I think, therefore I am. While this philosophical statement is true in a humanistic sense, your FICO score is proof of your being when it comes to personal finances. Make sure you understand how it works and what yours is before seeking financing.

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