Vision Credit Education, Inc.

Fair Isaac has released changes to its FICO credit scoring models. Find out what the changes are and how it might affect you.

FICO 08

The biggest change to the FICO scoring formula known as FICO 08 is the elimination of authorized user consideration. This is in response to the demands of creditors burned by consumers manipulating their credit scores. Many consumers were able to artificially raise their scores by 100 points or more by exploiting vulnerabilities in the existing scoring models.

Piggybacking, or benefiting from another’s seasoned account history via authorized user status, has been eliminated. The FICO 08 model eliminates any benefit (or harm) from authorized user status.

Authorized user accounts are ignored. It goes without saying that with this elimination, other inputs could increase in importance.

Some columnists are proposing that inquiries could hurt less, high balances could hurt more, and a mix of credit account types could be more important. These are likely true. However, we cannot readily confirm these additional changes with Fair Isaac. So for now, we are specifically focusing on the elimination of authorized user piggybacking.

How Changes Might Affect You

If you have relied on authorized user accounts, your credit report will suddenly lose these records. Only accounts in which you are a primary applicant or co-applicant will remain on your credit report. Accordingly, your credit score could shift dramatically due to the change.

Fair Isaac has claimed that the FICO 08 model is designed to be a better predictor of default risk. This has always been their claim for new releases. The purpose is to more accurately predict risk in the wake of the 2007 subprime mortgage fiasco. For now, we are recommending that you follow Fair Isaac’s existing credit tips.