FICO Expanding Number Of Bad Credit Categories, Overall Score Fluctuations Expected

Besides closing the authorized user piggyback loophole, another change in the new FICO score system is that the number of categories for risky debtors will go from two to four, reports the News&Observer. There will remain 8 categories for good credit, brining the total number of rankings to 12.

We suspect Fair Issac will use this expansion of the FICO system to also rejigger the formulas for many of the credit sectors. Expect your score to rise or fall by a few points in September, and probably fall pretty drastically if you have poor or little credit history.

A few points might not sound like much but under the current system, a score of 620 to 659 could pay $163 more monthly for a 30 year mortgage, a difference of $58,680 over the life of the loan.

Little information is available about the new FICO system, or even the old one, because Fair Issac is a private company and doesn’t want anyone stealing their methods. Instead, they’re allowed to keep everything in black box and have a major influence on the US economy. Outright regulation may not be the answer, but how about turning that black box into a glass one?

Only one of the credit bureaus is set to be using FICO 08 come September, the company has set the other two will switch over mid-2008. No doubt they’ll be guinea-piggying that bureau before switching over the others. Characteristically, the company declined to say which credit bureau it would be.

Your FICO credit score could change under new rules [News&Observer]
(Photo: Getty)