Personal Finance

What You Need to Know About the FICO Update

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Last updated on July 23, 2019 Comments: 8

Fair Isaac, the company that is responsible for the formula behind your FICO score, has been planning an update for a long time, and it’s now being put into practice, but not without a few wrinkles.

Called “FICO 08”, the new re-tooling should provide a more accurate risk assessment for anybody with a credit history. The most alarming thing right now is that while Fair Isaac is ready to roll out the new formula, according to the Chicago Tribune only one of the three credit reporting agencies, TransUnion, is making use of the new rules. Equifax is going ahead with plans to use FICO 08, but Experian may take quite a bit of time due to pending litigation with Fair Isaac. Suffice it to say that this won’t have an overnight impact on your ability to borrow.

Eventually, though, here’s what it means:

No more piggybacking

Not too long ago companies started offering to add someone with poor credit as an authorized user on an account belonging to someone with better credit. After a while, the credit rating for the less fortunate person would improve. Under the new formula, this sort of—let’s be frank—trickery will not be rewarded. Spouses and children, however, will not be penalized in the same way.

Bad accounts under $100 are no problem

Even if it goes to a collection agency, if you foul up on an account with a balance of less than $100, it won’t heavily affect your score.

A single serious flaw won’t ruin everything

With the older system, one big problem, such as a vehicle repossession, could torpedo your entire credit score. Now, if all other accounts are in good shape, one serious issue will not matter as much. – NewsChannel5

Available credit means more

This may be a case of unfortunate timing, with Americans’ credit lines shrinking as a result of fearful banks, but your future FICO score will depend more heavily on how much available credit you have. In short: keep your accounts open, even if you’re not using them.

You’ll want multiple types of credit in your name

In order to have a high score in the future, it won’t be enough to have a department store card or three, you’ll be rewarded more for having a loan or two in the mix, as well.

Article comments

Anonymous says:

quoted from here:


Anonymous says:

Again, I recommend you go to the source before publishing falicies and perpetuating the spread of disinformation. Fair Isaac is very clear on what their new system will and will not do. “Prevent” is a word that was never used by the Fair Isaac Corporation. Again, I urge you to be a responsible author, and get it right, before you write. Here is their exact quote:

“Fair Isaac analysts have developed patent-pending technology that includes AU data in the calculation of scores, while reducing potential impact from tampering.”

Smithee says:

Bill, the story you linked to is from July 2008, and the four articles I read were all published in the last 8 days.

From a fifth, more recent article on

Fair Isaac scientists found a method to prevent “credit repair piggybacking” while still permitting legitimate use of authorized user accounts.

My point is that I don’t know exactly how this will impact your company,, and neither do you.

Anonymous says:

Not incorrect. Just severely outdated.

Smithee says:

Well, I read four different news reports in order to write my report; I’d be shocked if they were all incorrect.

Anonymous says:

FICO controversy?

Anonymous says:

Boy did Smithee get his story wrong.

First, piggybacking benefits will continue for everyone. Read Fair Isaac’a written statement on page 2 of this pdf file here (sorry for the non personal site, but I think it is important for the readers of this article to know the truth):

…and here:

Second, while negative information will have LESS impact on your FICO score, it will certainly maintain the uneasy feelings an underwrite may have towards approving your loan. This distinction is not clear in your article and most certainly should be.

In order to learn the correct information and the full details of this change, visit the horses mouth:

Anonymous says:

While it is nice that in some cases FICO will be more forgiving, there is a darkish side to all this parsing out the score. It is clear that we have reached a point where it is possible for companies to track every expenditure. Some companies are already assigning risk scores to you, depending on what kind of purchases you are making. CompuCredit has used this to alter credit terms. If you pay to have your nails done, you are penalized more than if you pay for car repairs. Perhaps I’m being paranoid, but it seems as thought this is where FICO may be headed.