May 25, 2009
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There's gonna be some credit score changes around here, Pt.1
Some will rejoice, while others will lament.Only now are we starting to see serious changes in credit card ratings. Referred to as FICO '08 because of hopes to have it fully implemented back then, the credit card lending industry has been lagging in widespread usage. Not because there’s anything wrong with it, everyone agrees it’s the best we’ve ever had. The reason is that institutions in general, tend to resist change and always lag behind. Even though this system may be the best we’ve ever had, bear in mind that this is not a panacea of lax scrutiny, a free ride nor an ally-ally-home-free card. Some credit card consumers will be quite pleased, while others will get nailed.
The upright-minded credit card consumers will enjoy unprecedented fairness by learning this new system while the careless consumers will be hard-pressed. For those who really care, much is to be gained by reading the rest of this series and keeping abreast of what’s going on. We will explain these new rules and how to fare the best in building a good credit score. It will not only effect the best benefits of credit cards but, will have a significant bearing on getting good terms for buying real estate, automobiles, insurance and even good employability ratings.
With Fair Isaac Corp's new FICO '08 standard, the basic scoring scale is still the same. The range runs from 300 (totally unacceptable) to 850 (excellent). 700 and above is considered good, while the national average is about 690. Not surprisingly, mine is 690. The reason it’s so low is because it hasn't yet been assessed using the new model yet. There are several ways in which it was calculated unfairly (like everyone else). Over 90% of our nation’s larger credit card lending institutions rely on the FICO model and I expect to see my rating rise dramatically when the new model becomes widespread.