Fair Isaac has finally released their anticipated FICO 08 score model. This new credit scoring formula has many differences from the previous FICO model.

FICO 08 is the first big change in Fair Isaac?s scoring model since the 1980?s. Fair Isaac proudly predicts this new model will reduce the default rate on loans by 5-15% from their previous version.

Many experts estimate this figure to be as high as 50%. FICO 08 has been released in 2009 in response to changing economical conditions and the demand for a better risk model.

FICO is used by most financial institutions so understanding the new changes are crucial. Many lenders will quickly be integrating this new scoring model into their underwriting systems.

Many of the basic principles of FICO will remain the same. The score range of 300-850 will continue with the new model.

One of the best changes is that collection accounts with initial collection balances less than $100 will NO LONGER have any impact on the credit score.

Very small collections such as small medical bills will have no affect on the credit score if the initial balance on the account was less than $100 at the beginning of the reporting of the item on the credit report.

The new model will also be more forgiving on consumers who are late in one area, but not late in other areas on their credit. So if a consumer is occasionally late on a credit card account, the score change will be less than if that consumer was consistently late on all their payments.

The effect of an authorized user account will also change with FICO 08. There will be no more ?piggybacking?. This is when a customer with challenged credit gets added as an authorized user to accounts of someone with good credit to increase their scores.

With FICO 08 their will only be a score improvement for authorized user accounts for the consumer?s immediate family.

If the consumer has too few accounts, closed accounts, or has accounts inactive, the damage to the score will be greater than its predecessor FICO.

FICO 08 now contains between 12- 16 scorecards estimated. This is versus the 10 prior scorecards that existed with the prior FICO model. These scorecards are mathematical models that are used to assign a credit score.

Each scorecard is specific to an industry. For example the Mortgage Industry Option Scoring Model uses its own scorecard and weighs past mortgage history heavier than all other accounts while calculating a credit score.

FICO will be a big upgrade for Fair Isaac. Most lenders and the credit bureaus are quick to implement this new model due to its increased ability to accurately predict credit risk.

For more questions on credit scores and the enforcement of consumer credit rights visit www.PerfectCreditFast.com.