The New Forms of Credit Scoring and You

In the past years, various methods of credit scoring were used to calculate individual credit score. It used to be that credit score was mostly determined by the number of credit cards owned, the frequency of credit card charges, and the cardholder’s capability to pay off these charges. Consequently, those who do not own credit cards may be regarded as a poor candidate for credit. As a result, people who cannot qualify for loans may have little choice but to seek out subprime lenders.

How about people with no credit history? A research conducted by the Fair Isaac Corporation reveals that about 50 million Americans have little or no credit history at all. These group of borrowers easily become a target to predatory lenders. Without good credit history, they may find it difficult to get approval from the best lending companies in the market.

A New Credit Scoring

The FICO scoring system was introduced by the Fair Isaac Corporation in July 2004 and since then, has become the most widely used credit scoring system. It is used by the three major credit bureaus and many leading creditors as well. What makes the FICO scoring model distinct compared to other means of calculating credit rating? The FICO method is based on a number of factors such as the length of one’s credit history, payment history, the credit line usage, the types of account, and public records (bankruptcy, foreclosure, liens, etc.).

Recently, Fair Isaac Corporation announced a new form of scoring based on the FICO model called the Expansion score. Under this new system, credit cards and loans will not be the only sources of credit history. Rather, untraditional types of debts or credit such as payday loans, utility bills, and rental fees will be considered as part of a person’s credit history as well.

Yet another type of credit scoring system is created by the First American corporation, known as the Anthem Score. Under this scoring system, rental history, child-care expenses and utility payments will be considered as a major part of credit history. Financing corporations are presently considering the potential of the Anthem Score and the possibility of adapting this new system.

The PRBC or Payment Reporting Builds Credit credit reporting agency has also developed its own credit scoring method. Their credit scoring system focuses on rental and utility payments of the borrower. The scores are rated using the letters of the alphabet, with A being the highest rating and D as the lowest rating.

These untraditional methods of calculating credit scores are still yet to be explored by lending companies and financial institutions. While there are a few credit reporting agencies and financing companies that make use of other models, The FICO scoring system still remains to be the leading method in the industry. These credit scoring methods can further be developed so that a person’s credit worthiness can be determined by a more reliable and reasonable criteria.


About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010

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