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FICO’s New Model Gives You a Better Chance

By George Hauser
Published: Thursday, October 1st, 2009

You may consider yourself to be creditworthy but when FICO is at work, you have a very limited chance to represent yourself. You need a good credit score advice in order to find out how you can land that financial assistance that you badly need. FICO is a formula or model created by Fair Isaac and Co. to compute for your credit score. It considers a number of things and is considered a classic way of computing for credit score.

FICO takes into consideration the number of current credit accounts that you have along with the corresponding balances, your payment history, your credit limit, and your employment verification. All these will be the information that will determine whether you are creditworthy or you should go looking for more credit score advice. You are deemed creditworthy if FICO says that you are likely to pay your debt as read through your credit score that it has computed. The credit score that FICO uses ranges form 300 to 850 and these scores will also determine the interest rates on all your credit accounts.

As time has advanced rapidly, there are more potential borrowers who have been losing their chances of getting credit due to errors on their credit reports that are not really their fault. There may be a good credit score advice that can help you correct an error in your credit report but errors can occur more than once in the entirety of your life as a borrower. Fair Isaac and Co. has developed a more individualized process of computing your credit score and they came up with FICO NextGen risk assessment scoring models. These newer models are designed to take into account the details of the distinctions among different types of delinquencies when evaluating credit risk.

All the three major credit reporting agencies– TransUnion, Equifax, and Experian– now utilize the FICO NextGen scoring system. Experian/Fair Isaac Advanced Risk Model 2.0 has likewise been introduced which features a score range of 150-950. This newer model can reduce the need for credit score advice since it developed from the classic model by increasing the number of variables used to evaluate and predict an applicant’s credit practices in the future.

With the introduction of the Advanced Risk scoring model, more applicants may have their credits approved because there are more classifications in the satisfactory credit. Instead of having only 10 comparative scoring segments that is used by the classic FICO model, the Advanced Risk Model will use 18 scoring segments. Your minor payment lapses will now be categorized separately from serious debt infractions. In the old model, all consumers who have problematic accounts, no matter how minor, are placed as high-risk profiles. Even if you take all good credit score advice, you can still be pegged as a high-risk profile by the old FICO model. The newer model is designed to place both creditor and applicant in a win-win situation since with every application approved by a creditor, profits increased. Nevertheless, the newer model still offers a precise prediction that can be referred to in order to reduce profit losses on future delinquent accounts.

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