Changes are Coming to Fair Isaac’s FICO Credit Score Calculation
According to an article on MSN Money published today, Fair Isaac, the creator of the popular FICO credit score, will adjust the way it calculate a person’s credit worthiness to better reflect “who’s a good risk and who’s a bad one” at the time when people intend to have, and use, more credit cards than before. Highlights of the upcoming changes in FICO 08 credit score include:
- Applying for new credit accounts may hurt less.
- Having high balances on your credit cards could hurt more.
- Actively using the credit accounts you have may be more important.
- Having both revolving and installment accounts on your report could help you more, as the new formula is more sensitive to your ability to handle different types of credit.
Among the new changes, the one that I particularly like is getting more credit cards may not hurt my score much with the new formula, as I have been averaging 2 new cards a year for a quite long time. Though my own example has already proved to some degree that having dozens of credit cards all in good standing doesn’t hurt my credit score, it’s still a good news for someone like me who is active in the credit card arbitrage game 
The article also offers some tips on how to get and maintain a good credit scores, such as lower the balance, don’t close old accounts and keep them active, etc. However, I won’t use those old cards that I haven’t used in years once every month as the article suggested just for the purpose of keeping them active. That will effectively create a nightmare when I pay the bills.
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“Having high balances on your credit cards could hurt more.”
That’s the one thats gonna hurt my, and many others, credit score the most.
Good Morning:
I have worked very hard to obtain and maintain a good credit score. However I beleive that because of where I live (Low income neighborhood in NYC-Bedford-Stuyvestant) my credit score (Experian 757) does not mean as much as it would if lived elsewhere. Is this true? Do communities have credit ratings. My neighborhood has been hit hard by the subprime mess. I am greatful to God that I did not get caught up in it. I have a fixed rate martgage from a prime lender and 75% equity in my home. It seems as if my score is going to suffer through no fault of my own because of the state of the economy and where I choose to live. Is this true?
Also when will the new FICO formula go into effect? I want to buy scores after the change is made.