There are three primary differences of note. They are:

1. Negligible Collection and Public Record Exclusion – The newest FICO score will ignore any collections or public records with an ORIGINAL amount of less than $100. It’s important to note that for a collection to be bypassed by the score, thanks to the new logic, it has to be reported as a 3rd party collection agency account (FDCPA) and not the collection department of a credit card company (FCRA). If the collection shows up as ‘trade’ then it will still count against your score even if it is less than $100. And, if the original amount was over $100 but it has been paid down to a current balance of less than $100 it will still count in your score. This is good news for consumers who are haunted by low dollar collections caused by misdirected final utility bills, insurance snafus, service accounts, and other easily disputable minor collection items. The purpose of the change appears to be to help the credit reporting bureaus to avoid being named as co-defendants in credit libel litigation based on the unscrupulous actions of third party debt collectors. The credit bureaus have been getting hammered in this area. This was a smart move on their part but does not go far enough in that they retain the actual information even though it is not being scored against. Although this is a very welcomed step in the right direction, it unfortunately continues to place the burden of proof on the consumer rather than on the creditor or debt collector. We will still aggressively pursue these accounts on our clients behalf.

2. Credit Card Utilization – Credit card utilization, the ratio of your current balances to your current credit limits on revolving credit card accounts, remains a highly important factor in your FICO credit score. However, in FICO 08 it takes on a whole new level of importance. Consumers who have balances that approach the reported credit limit will find their scores lower with FICO 08 than with previous versions of the scoring software. FICO’s research claims to have discovered that consumers who are highly utilized with their credit cards are more risky than they were in the past, hence the more punitive treatment. The proper consumer response to this is the same as before….keep your balances below 50% of the available credit limit.

3. No Piggy-backing Allowed – This new version of FICO apparently has the ability to determine if an authorized user credit card account is an attempt to game the credit scoring system through piggy-backing, which is the process whereby a consumer with poor credit would pay to be added to the credit card of someone with good credit as an authorized user. Fair Isaac will not disclose how they’re able to tell the difference between a legitimate authorized user account belonging to, say, a husband and wife versus one that has been made it to a credit report through other means, such as piggy-backing. You will recall that FICO 08 was originally going to completely ignore all authorized user accounts. This new logic seems to split the difference between ignoring all authorized user relationships and doing nothing to discourage the use of piggy-backing services. This seems like a legitimate course of action as it is intended to bring some semblance of actual accuracy to credit reports. Now if they would only do the same thing to creditors, debt collectors, and re-sellers of debt in removing these obvious ‘piggy-backed’ account spreading items from consumer’s reports, then this might be fair…….but we never expected fair.

The best advice for consumers who will begin to be scored with this new FICO score is for them to continue to do what they’re doing now. Continue to make all of your payments on time. Continue to work down your credit card balances as much as possible. Continue to apply for credit only when needed. Continue to fight aggressively for all of your rights under the Fair Credit Reporting Act, Fair Debt Collections Practices Act, State-by-state statutes of limitations on debts and collections, and where applicable state’s Business and Professions Codes.

If you can do all of these things then your FICO 08 score will be fine.