FICO 08

FICO 08 is the version of Fair Isaac Corporation’s base credit-scoring model introduced in 2009.

FICO 08, also known as FICO 8 and FICO Score 8, made key adjustments to certain metrics used to calculate credit scores. Fair Isaac Corporation adjusted its base credit-scoring methodology to increase its sensitivity toward high credit card balances, reduce the impact of occasional late payments and ignore collection amounts for balances under $100. The new version also added safeguards to reduce the benefits of an obscure practice called tradeline renting. Previous versions of the credit score contained a loophole that allowed individuals with poor credit to include unrelated card with significantly better credit as authorized users on their accounts in order to help boost their rating and repair damage caused by a bad credit history.

FICO intends the adjustments to the formula to reflect current best practices for predicting consumer credit risk. As of 2018, FICO 08 represents the most widely adopted version of FICO credit scoring among the three major U.S. credit bureaus Experian, Equifax and TransUnion.

FICO introduced its base credit scoring system in 1989. When the company makes adjustments to its scores, it releases new versions to the lending marketplace. Major credit bureaus and lenders decide whether to adopt new versions and their time line for doing so, which means a wide variety of FICO score calculations exist in the wild. To further complicate matters, FICO offers a set of industry-specific scores for auto lenders, mortgage lenders and bank card issuers.

In general, FICO’s base scoring system weights various elements of a borrower’s credit history to generate a prediction about how likely or unlikely they are to avoid defaulting on future loans. A borrower’s payment history makes up 35 percent of the score, the aggregate amount owed accounts for 30 percent, the length of the borrower’s credit history accounts for 15 percent, while new lines of credit opened and current credit mix account for 10 percent each. Updates to FICO’s base score tend to involve adjustments in the calculations used for each of these categories.

Some of the adjustments that make sense for one type of lending don’t necessarily work for other types. For example, the mortgage lending market still tends to use FICO Score 5 because lenders underwriting large loans may not want to be as forgiving about unpaid collection accounts as the newer base scores that exclude them if they do not exceed $100.

Fair Isaac released FICO Score 9 in 2016, with adjustments to the treatment of medical collection accounts, increased sensitivity to rental history and a more forgiving approach to fully paid third-party collections. None of the major credit bureaus has adopted the new version to date, however.