April 9,2009
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Credit Score Drift, Pt.2
Understanding FICO, old and new.What's FICO all about, anyway?: If you've gotten this far, it probably means that, at least, you have some interest in finding out what FICO stuff is and how it can effect your life. The FICO Scoring System was devised many years ago by the Fair Isaac's Corp. and has become the credit card industry standard today for evaluating a client's creditworthiness. Ninety percent of the credit card industry (of almost 700 credit card lenders) subscribes to this standard.
A client could be an individual, a family of even a small business, whichever is being considered worthy of authority concerning borrowing against a credit card. The scores cover the range from 300 to 850 with the higher end being the better. For years now, this has been so stable that not much maintenance was required. But, as the previous article explains, that has all changed today. To complicate things yet further, even this standard is undergoing a major revision.. The new release called "FICO ‘08" is being implemented as we speak (or read). So named by the desire to have it fully implemented by last year, "FICO ‘08" is still in the beginning stages of credit card industry-wide implementation.
The credit card industry is like a huge freighter and expecting any quick change is futile. The new "FICO ‘08" standard is, by far, much more fair and accurate. So if you experience a credit card judgment that you're sure is unfair, chances are, you've been judged by the old standards. So far, from all the complaints being voiced around the world, it doesn't appear that any sweeping change has occurred yet.
As the Congress steps up the pace of mandatory reform of the credit card industry, we'll see more meaningful changes in the near future. Read all about these nice upcoming standards in my article entitled: "Rules of FICO'08 in 2009".