The New Credit Score Formula

Credit bureaus will soon be introducing the new FICO 08 score. Yeah I know, it's 09. The implementation of the FICO 08 score was delayed while Experian, TransUnion, and Equifax fought amongst themselves. Now that they've returned their attention to beating us up instead, TransUnion will begin offering the score in late January with the other credit bureaus to follow later in the year. The FICO score is factored into mortgage lending decisions more than 75% of the time and it's used by 90% of the largest U.S. lenders. The new score puts a higher weight on how much you're using your available credit. For those who carry a higher balance on your cards, you'll see a more significant negative effect on your credit score. The new score also reacts more negatively if consumers have only a few open & active accounts. To make matters worse, many credit card companies are lowering available credit lines and card limits, further damaging credit scores (feeling a little ganged up on?).

Three positives from the new credit score: small collection accounts under $100 are ignored, serious credit setbacks such as a charge-off or a repossession are less damaging as long as other factors are in good standing, and authorized user accounts (which some credit repair companies were using to artificially inflate credit scores) will only be factored in on a limited basis.