Credit Repair Blog

FICO’s 2008 Credit Score—What’s Happening?

Fair Isaac announced last year that its new scoring formula, known as FICO 08, wouldn’t recognize authorized-user accounts. Critics said the change would lower credit scores for millions of consumers, forcing them to pay more for everything from mortgages to car loans.

In the Fall of 2007, Fair Isaacs (the creator of the FICO score) announced a new scoring model to be launched in 2008 (and called, not surprisingly, FICO 08).  In the model, Fair Isaacs planned to eliminate the concept of authorized user accounts.  Some companies (including credit.com) pushed back.  About 1% of consumers would no longer have enough of a credit history to get a score at all, according to a survey by Credit.com. Without a credit score, it’s very difficult to qualify for a loan.

Lenders, meanwhile, raised a regulatory concern. They told Fair Isaac that they used FICO scores to comply with the Equal Credit Opportunity Act, which requires lenders to consider a spouse’s credit history when weighing a potential borrower’s credit risk. If Fair Isaac stopped recognizing authorized users, lenders said they wouldn’t be able to use FICO scores to meet that requirement.

In response, Fair Isaac sent its scoring model back to the laboratory. Company analysts came up with a new version of FICO 08 that will continue to recognize authorized-user accounts but make it more difficult for credit-repair agencies to manipulate credit scores, Quinn says. Fair Isaac declined to provide details on how its new formula will close the piggybacking loophole. The company says it’s working with the three credit-reporting agencies to get FICO 08 adopted as quickly as possible.