Starting this summer, FICO will use a new credit scoring system, called FICO Score 9*. FICO is the most widely used measure of a consumer’s credit risk. The new system uses a highly sophisticated and complex modeling approach that will help lenders, employers and others who use credit checks to better predict buying power and other consumer behaviors when applying for loans, credit cards and jobs.
To give you an idea of the scope of FICO, in 2013 lenders accessed more than 10 billion FICO scores, and 90% of U.S. consumer lending decisions were based on FICO information! Under the new system, a consumer’s FICO score will be weighted like this:
- Payment history – 35%
- Amounts owed – 30%
- Length of credit history – 15%
- New credit – 10%
- Types of credit used – 10%
With credit history being such an important part of lending decisions, it is critical to check your credit regularly to know where you stand and to make corrections when you find a mistake. Not sure how to do this or want some help ordering and understanding your credit score? Penny Smart Girl can help! Just contact us to ask your question or to set up a consultation.
From chaos to calm,
*Source: CPA Practice Advisor: FICO to Release New Credit Scoring System, Mar. 11, 2014