Fair Issac, the company that calculates the FICO score, is changing the calculation methodology for 2008.  As you may know, the FICO score has been used to determine loan approvals, borrowing rates, cellphone usage, and utility authorizations, and it has been as a factor in calculating insurance premiums at many companies.

The new methodology, dubbed FICO 08, is supposedly more forgiving for those who periodically make a mistake, but will punish repeat offenders more harshly.

Fair Isaac claims that more people will see their scores go up than the number of folks whose scores go down.

One improvement in the new system is the removal of piggybacking, where someone could improve their score by becoming an authorized user on another person's account who had better credit.  Some credit experts had recommended that children be added to their parents' credit cards to improve their credit scores and length of credit history.

For more information about FICO 08, click here.

By the way, you still need to monitor your credit report, as the accuracy of the information in the report is still tantamount for best scoring.

Beware of scams that promise to give you a free credit report.  If you visit annualcreditreport.com, you can request one credit report per year for free from each of 3 major credit reporting agencies (Equifax, Experian, TransUnion).  Even though you can get reports from all 3 services at the same time, I suggest spacing out your requests, so that you can get a new credit report every 4 months.

Note : even if you don't intend to borrow money going forward, you still should monitor your credit report, to guard against identity theft.

Powered by ScribeFire.