Hi All,

Evidently, the Fair Issac Corporation (FICO) is changing the way it calculates individual FICO scores. The economic downturn and the mortgage meltdown have created a need for more accurate measurement of credit risk. The Model is called FICO 08.

FICO 08 will take into account the same factors as the old version including timely payment history, length of credit history, amount of debt, ratio of debt to available credit, type of debt and any excessive amount of recent new credit. However, it will add several new elements and redo the weighting of some others:

1) Only spouses and children can be authorized users of accounts. It won’t be possible to rent your credit to any more.

2) Debts less than $100 will matter less if they are sent to collections.

3) The score will be calculated with your total picture in mind. For example, if you have only one delinquency, but everything else is okay, your score won’t be affected as much.

4) Having less available credit will drag down your score more.

5) Diversity matters more. If you have a mix of credit cards, student and car loans, your score will be helped.

6) Closing accounts will bring down your score.

For more on this, click here and here.

Best,

James

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