Fixing the credit score mess

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Updated Dec 14, 2009

The silly rules that credit card companies play by have gotten plenty of airing in recent years. Be a day late on your electric bill, and wham! That’s the sound of extra percentage points piled on top of an already high rate. Your credit score suffers, too.

The good news is that Fair Isaac Corp., which developed the FICO score method of rating credit histories, will introduce a new version this spring called FICO 08. The three major credit reporting agencies – Equifax, Experian and TransUnion – each use the FICO formula to determine their scores.

One advantage of the new system is that if virtually all your payments are on time and your overall financial picture is good, that late electric bill won’t matter nearly as much. Doesn’t mean you can expect to knock 8 percentage points off that next truck loan, but if you’re someone who’s been arbitrarily penalized because of a credit score, it could help.

Read about the other pros – and cons – of FICO 08 in this account by personal finance writer Andrew Housser.