More Group Segments In New FICO System

As reported, the FICO credit-scoring system is set to undergo a major overhaul in September. Although Fair Isaac Corp., the Minneapolis company that created the FICO score doesn't give out many details about the changes, the company spokesman said there will be more segments in their scoring model.

Fair Isaac divides the population into 10 segments based on credit history and applies a different formula to each. Eight segments include people with good credit and two are for people with serious problems.

Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. That could result in a slight change up or down in many scores.

The company claims the new system will give lenders more dependable scores for those higher-risk consumers and those who have little history. That means if you're on the margin or trying to establish your credit, your credit score may change more significantly than those with good credit.

(June 18, 2007)

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