SmartMoney has a feature this week about Susan Blue Hitt, an Austin-based math nerd who loves football, flies planes, and is responsible for the revised FICO scoring model “that will change the way credit scores are calculated, affecting interest rates for 160 million Americans” sometime next year.
There are some fun bits of trivia in the article—for instance, FICO has a “subterranean data warehouse outside its Minneapolis headquarters,” and Hitt’s own credit score is 770, which is a great score but far from perfect (we’re sure some Consumerist readers are already scoffing).
To build the 2008 version, which will launch early next year, Hitt and her team of 25 analysts pulled the 2005 and 2007 credit reports of 5 million consumers to see how their credit profiles fared over time. Given this historical data, she can predict how characteristics such as your total number of credit cards (three is often ideal) or average account age (longer is better) affect your chance of defaulting on a loan in the future. Every one of the 30 or so possible characteristics derived from your report earns a certain number of points, but the calculations don’t end there. Each characteristic counts for a bigger or smaller portion of your total score, depending on which of 12 borrower profiles you fit (kid with his first credit card, for example, or perennial deadbeat).