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Fair Isaac and Co. is the introduction of FICO 08, an improved scoring model designed to provide lenders a more accurate assessment of the risks of access to candidates. In view of increasing losses and declining recovery values (the amount a lender is able, after a reposed vehicle auction), lenders were looking for a better model for predicting the likelihood of a loan default. After Mortgage Daily News (1/7/08), Fair Isaac believes that FICO 08 will help lenders reduce default rates of consumer loans 5 to 15%.

The basic elements that FICO evaluated in the computer industry a credit outcome will largely look and feel the same. Lenders and creditors continue to be considered:

• Payment history: Has the consumer consistently paid their accounts on time in accordance with the provisions of the agreement or credit?
• Amounts owed: How many accounts have balances, the amount due for each, and what proportion of available credit is used.
• Length of Credit History: Number of newly opened accounts and inquiries, the time since the last bill and openings, there is a restoration of positive credit history?
• New credit: How many newly opened accounts and credit inquiries are on file?
• Credit mix: How many and what types of accounts are open?

The difference with FICO 08 is the weight of each of these factors. FICO 08 will be fine "" slice and dice "information. According to Credit Technologies, Inc. "Each scoring model is Scorecards, (also known as groups.) The current FICO model used 10 scorecards. FICO 08 adds 2 more, now splitting the population into 12 segments (eight for people with good credit and four for people with bad credit.) This might be a slight change in the consumer credit result either upwards or downwards "

FICO O8 is also better identify young or thin credit files, which may have high values, even if they are relatively few accounts, many recently opened. Consumers are actively seeking new credit is easy to identify, so that the creditors to more accurately examine the potential risks in the granting of too many new accounts at once.

Another difference is how FICO 08 looks at the credit files. Greater attention is paid to the combination of consumer credit, such as a credit card or revolving account, and an installment loan or mortgage. This, according to Fair Isaac, shows that consumers can be paid over several different types of accounts. FICO 08 will be more value to the borrower with a high proportion of their available credit. Accounts at or near its borders, a lower outcome for consumers.

FICO 08 is more difficult to "repeat offenders", the consumers who are consistently delinquent on their accounts and to forgive the occasional mistake. While delinquent accounts have always had a negative effect on a FICO Score, for consumers, for a number of accounts currently past, by an even lower result than they currently have. A consumer with a derogatory or delinquent account will not be dinged so hard, and in fact, a consumer has an account gap, which is also a series of accounts in good standing may receive a higher profit under the new system. However, FICO 08 will be a greater distinction for heavy losses more than 90 days late. Several delinquent accounts could significantly lower consumer income. According to the Better Business Bureau (BBB), the new scoring method is more forgiving minor slip-ups.

One very important change is that FICO 08 is coming no more than "authorized user" in the computer industry a credit score. This is in response to the restriction of the use of "piggy backing" or "credit-sharing" if a creditor with a low value to an account of a non-connected with the consumer in an effort to include the first consumer outcome. If a consumer's credit history includes only authorized accounts can use their credit earnings disappear!

Consumers who consider themselves "lower" risk FICO 08th May start to better terms from creditors. A consumer as a "higher" risk under the new scoring system may, under favorable conditions, or it may also be harder to obtain credit. Consumers who occasionally mess up, have a good mix of credit types, with a single account their actual delinquent loan values rise. Consumers who consistently mess up the balance of credit or near their borders, are 90 days late on multiple accounts or authorized user accounts in the file, you can use their credit scores fall. In addition, FICO 08 will not "ding" a credit-results for several studies related credit. A consumer shopping for a mortgage or a car loan, which for several lenders will not see their earnings decline because of requests.

Yes, when FICO 08 will come into play? Experian is expected to continue with the FICO 08 in the first quarter of 2008, while TRANS UNION believes they will be ready by the second quarter of 2008. At this time, Equifax has to offer FICO 08 through the settlement of disputes relating to "" Vantage Score ", which is a joint venture, to which all three offices in 2006 to compete with Fair Isaac's FICO scoring system. The action provided by Fair Isaac, based on unfair and anticompetitive practices that are harming the FICO brand. The action has led to Equifax relationship with Fair Isaac to remain "tight" until the process is resolved, says David Rubinger, Equifax spokesman, quoted in the December 19, 2007 edition of the Wall Street Journal,

If FICO 08 is implemented, many consumers are not a significant difference in their scores. According to Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac, quoted in the 19th December 2007 edition of the Wall Street Journal, "" Overall, more consumers their FICO scores to the top to see something as their grades drop. "

Exactly what the future brings, it is unclear whether FICO 08, the purchasing lender, remains to be seen. One thing for the public environment FICO 08th May, the degree of fear of your customers. The ability to communicate effectively what they can expect to go a long way in easing their anxiety. If change is indeed inevitable, it is best to be ready for them!

Geoff Cohen is a seasoned auto professional, with more than 30 years experience. He has done it all, from the representative of F & I Manager, New Car Manager, Used Vehicle Manager, up to GSM and GM. He also worked as Area Sales Manager for a large subprime lenders as well as his own and run BHPH Auto Leasing / Brokerage Company. He is currently Dean of the Faculty and Chairman of the Academy of Special Finance. Geoff is a contribution to the automotive industry, several publications including F & I Magazine and World of Special Finance Magazine, as well as a guest speaker to many dealer groups around the country. He coaches car dealers to improve their special finance departments, and is the National Accounts Manager for AutoLending Network, which helps merchants Subprime sales and profits to the next level!