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February 6,2009

  • Rules of FICO'08 in 2009, Pt.1
     – A much more fair system.

    As the old adage goes: "Nothin' stays the same". So it is with FICO Scores as they try and keep on top of an ever-changing credit card world. After all the trouble we've gone through to keep abreast and conform to the industry's rules, they go and move the goal posts. In order to stay in the game, however, we must keep up with credit card rules or else be left behind. The new credit card-scoring rules will be rolling out soon, so it's probably a good idea to take an early look so to be better-prepared.

    Originally, the FICO Scoring system was developed in order to better-track credit histories and became the standard for predicting credit card risk to protect the credit card industry. The Fair Isaac Corporation (FICO) have implemented new formulae and submitted these to the three major credit reporting bureaus of our country.

    These bureaus still remain the standard sources that calculate and dictate the individual risk scores for our nation's credit card consumers. These bureaus are: TransUnion, Experian and Equifax. All of the major credit card lending institutions today (and almost all the others, as well) start out by inquiring to get these scores. They will, almost undoubtedly, automatically dovetail into this new system when it is first implemented in a month or two.

    Called ‘FICO 08' for it's projected beginning for that year, this new system will still use the scoring range between 300 and 850. As credit card consumers, our creditworthiness will be based on the new mathematical formulae which will weigh several important categories. Some of these will be:

    • Credit history;

    • Credit Utilization (amount of credit we use compared to what's available to us);

    • The number of Late Payments;

    • The number of On-time Payments;

    • The Nature of the Payments (if already in default, how badly, etc.);

    • Other Miscellaneous Variables.

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