New Fair Isaac Rules - Good or Bad?

Fair Isaac scoring offers credit providers a tool to judge the likelihood that a borrower will repay on time. These new rules, which are coming this spring, should help to avoid the loan defaults which we saw in the recent past. Based on this article from the Wall Street Journal the changes seem to be a good thing.

Fair Isaac's new credit score to be more forgiving
But the FICO guidelines will be harder on repeat offenders

JANE J. KIM
Wall Street Journal

The company that comes up with credit scores for millions of Americans is changing its formula -- and that could affect how easily you get credit in the future.

Fair Isaac Corp., maker of the popular FICO credit score used by most lenders, says its new scoring model will better predict the likelihood of a borrower defaulting on a loan. For one thing, the new model, dubbed FICO 08, will be more forgiving of occasional slips by consumers, but will take a harder line on repeat offenders. Fair Isaac predicts its new system will help lenders reduce default rates on their consumer credit by between 5 percent and 15 percent.

The rollout of the new credit-scoring system comes at a time when lenders say they are eager for more-accurate measures of credit risk, in part because of rising loan defaults as subprime mortgages go bad and housing prices fall. And there are signs that delinquencies are creeping into other types of consumer debt, including auto loans, further prompting lenders to tighten up on credit...

However, the new rules eliminate the authorized user from the equation. While this is a good thing in that it eliminates those who "bought" the right to be an authorized buyer, some consumer advocates think this will have a negative impact on the credit scores of many. This article, which I found, on credit.com offers good insite into these new rules.

Consumer Alert:
FICO Scores Dropping Authorized User Accounts

John Ulzheimer and Emily Davidson
Credit.com

A major change to the FICO® credit score formula was announced by Fair Isaac Corporation earlier this week. FICO scores will no longer factor authorized user accounts into their credit scoring formulas.

Consumers who are listed as authorized users on credit card accounts will likely see a significant change in their credit scores when this modification takes place later this summer.

For most consumers, this change will have a negative impact on their credit scores. Only consumers who are listed as an authorized user on negative accounts or accounts that have balances that are close to the credit limit will possibly see an increase in their credit scores...