Changes to FICO Credit Scoring System
From the Star Telegram:
In September, the FICO credit-scoring system is set to undergo a major overhaul. Fair Isaac Corp., the Minneapolis company that creates the formula used to calculate the score, is downplaying the change, saying that it won't have much of an effect.
But 40 of the top 50 financial institutions in the country rely on FICO scores to determine whether to approve a loan and what rate to charge. Retailers, landlords, insurance companies, employers and utilities also use it to decide how to do business with you -- or whether they should.
So any change in the way that scores are decided affects millions.
Because Fair Isaac doesn't want rivals to copy its formula, it isn't giving out too many details about the changes, but spokesman Chris Watts did say this: Fair Isaac divides the population into 10 segments based on credit history and applies a different formula to each. Eight segments include people with good credit, and two are for people with serious problems. Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. That could result in a slight change -- up or down -- in many scores.
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In September, the FICO credit-scoring system is set to undergo a major overhaul. Fair Isaac Corp., the Minneapolis company that creates the formula used to calculate the score, is downplaying the change, saying that it won't have much of an effect.
But 40 of the top 50 financial institutions in the country rely on FICO scores to determine whether to approve a loan and what rate to charge. Retailers, landlords, insurance companies, employers and utilities also use it to decide how to do business with you -- or whether they should.
So any change in the way that scores are decided affects millions.
Because Fair Isaac doesn't want rivals to copy its formula, it isn't giving out too many details about the changes, but spokesman Chris Watts did say this: Fair Isaac divides the population into 10 segments based on credit history and applies a different formula to each. Eight segments include people with good credit, and two are for people with serious problems. Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. That could result in a slight change -- up or down -- in many scores.
Read Full Article
posted by Dave at 1:45 PM
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