When FICO introduced the new FICO 08 credit score in January, TransUnion jumped on board, but Equifax and Experian did not.
Now Equifax will also make this newest version of the FICO score available to lenders and businesses. Equifax calls the new score “Beacon 09″ and joins FICO in saying that it is the most accurate scoring model yet for predicting a consumer’s credit risk.
Some things will remain the same. For instance, the scores will still range from 300 to 850 and consumers will still have to meet minimum criteria to even have a credit score.
In order to generate a score, a consumer must have an account that has been open for six months or more, and that has been updated within the past six months. Since many small companies such as utilities don’t report to the credit bureaus, consumers need to have some kind of credit card, car loan, mortgage, or other account that does report.
In addition, your credit report must not indicate the word “deceased.” This can be a problem for a spouse who has held all accounts jointly.
Good news for some consumers is that under the new scoring model, a one-time mistake such as late payment won’t count so heavily. In fact, consumers whose scores have dropped due to such an entry will probably see their scores go up.
The bad news is that the new model will put more weight on the total debt load a consumer carries. It will become more important than ever to pay down debts and maintain a large margin of unused credit.
“Piggybacking” will once again carry some weight, because of new technology that will help prevent its abuse. This practice, in which an authorized user could “piggyback” on someone else’s good credit rating, led to abuses in the past.
The old FICO scoring model will still be available and will be used by companies who choose not to switch over. Predictions are that most users will be smaller lenders because the change will be complicated for large lenders.
Experian is currently in a lawsuit with FICO and there is no word on when or if it will adopt the new model. Since Experian severed ties with myfico.com, Experian’s FICO scores have not been available directly to consumers but could still be accessed by banks and other lenders.
Author: Mike Clover
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