18 Feb

Credit Score Program: Fico 08 Arrives in ’09

Denver, Colorado 02-15-09 — More than a year and a half after it was first announced, FICO® 08 — an updated version of the FICO® credit score system –- is finally making its debut in ‘09.

Fair Isaac Corp., creator of the FICO credit score, announced the first usage of the controversial FICO 08 when TransUnion utilized the new credit scoring program on January 29th. Equifax is expected to adopt the new system later this year. Experian Group, Ltd. has yet to institute the new system and is not expected to do so anytime soon, pending an unsettled lawsuit with Fair Isaac. 

Initially proposed in June 2007, the original intent of FICO 08 was to stop the use of credit piggybacking as a method of improving credit scores. Credit piggybacking is a legal method of improving a personal credit rating by adding an individual as an “authorized user” onto an account of a person who already has good credit. This quickly and dramatically raises the authorized user’s FICO credit score.  

Fair Isaac took the position that the consideration of “authorized user” accounts in their scoring model was a loophole that needed to be closed.

An Accidental Discovery (con’t)

Bill Airy says he accidentally discovered the benefits of “credit piggybacking” when he added his wife as an authorized user to his credit card account and her credit score suddenly “shot through the roof” on the coattails of his stellar credit history. “She went from not having a credit score to 798 in less than 30 days!” Airy reports.

Now he matches responsible citizens to those with good credit — to the benefit of both parties and the economy as a whole. One good example of this is a successful Aspen, Colorado builder with a 30-year track record, who, because of the changing economy and more stringent credit requirements, was suddenly asked to personally guarantee his company’s construction loans. Because his credit had always been in the company’s name, he didn’t have any personal credit history to support the guarantee. For the first time ever, he was denied business loans. Adding good credit to his history allowed him to stay in business and keep his company from the list of thousands going out of business.

Establishing good credit for those with little or no personal credit history in their own names also helped a Michigan woman create a successful business fixing and flipping homes in her distressed neighborhood. With plenty of cash reserves but no credit history, credit piggybacking not only helps her purchase and fix up languishing homes in her community, it also helps buyers with no credit history get their purchases financed. One purchaser who benefited from credit piggybacking was a single mother with a stable income who was left without any credit in her own name after her husband left her.

read full "Credit Score Program: Fico 08 Arrives in ’09" press release

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