New Credit Scoring Model Could Help Millions

Larry Smith September 19, 2011 0

What
is FICO and how does it help my credit
score?

FICO is Fair, Isaac and Co., founded by engineer Bill Fair and
mathematician Earl Isaac in 1956. It was created to help department
stores and gas station chains decide when to extend in-house credit
cards to customers. FICO has become the benchmark of the credit
score.

FICO is a scoring model which assigns a credit score to each
consumer. The credit
score is used to determine whether the consumer is a financial
risk and worthy of receiving credit. The score is based on a number
of factors including consumers’ histories of paying their debts on
time, how much of their available credit they use, how many
different types of credit they use and whether they have a history
of unpaid debts.

FICO has created a new model, FICO 8. This model will allegedly
be beneficial to millions of consumers. First, it will go easier on
consumers who miss payments on small debts (Under $100) and improve
their credit score. Secondly, it will help lenders make better
decisions because it is more precise. This new model categorizes
consumers into 16 categories. The current model only uses 10
categories.

So far, only Citibank has
implemented this new model. The other big financial institutions
including Bank of American and Chase Bank have yet to change over.
Additionally, Fannie Mae and Freddie Mac have not done so
either.

The new FICO scoring model
could help millions of consumers
improve their credit scores and reduce the amount of money they pay
in interest. Most consumers have not noticed a change in their
credit score from FICO 8 because major lenders have been slow to
switch to the new scoring model.  Read more, click here.   

If your credit report has
errors and you are fed up, please contact SmithMarco, P.C.  We
help consumers with credit
report problems.  Call an attorney now and get a free case review!

 

 

 

Larry Smith
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