Did you know 90% of the 100 largest banks use your FICO score to determine whether they will lend you money? Now in 2008 the company who created the FICO score is changing the way your score will be calculated.

Fair Issac is the company that created the FICO credit scoring system.  They will let you check out your FICO score at www.myfico.com.  The Wall Street Journal explains the changes in the new 2008 scoring system.

Why are they making changes?

It seems demand from customers (IE: big banks) has prompted the change.  The whole sub-prime meltdown has left the banks reeling and in need of a new way to assess the risk of lending money to someone with a "thin" or "relatively new" credit history.  The scores will stay the same 350-800.  The higher your score the better.  According to Fair Issac most of us will see an increase in our credit scores.  The big change is the way your credit information will be deciphered. 

Consumers who have several types of accounts- credit card, car loan, home loan- who pay those on time will have the best scores.  Consumers who have only one type of account won’t score as high.  Those who let their payments fall 90 days behind will be penalized the most.

Want to check out your credit score?

Go to Free credit report .  Experian will let you get a copy of your credit report and give you an explanation of your score.  Fair Issac consumer information will help you analyze your credit and give you some helpful information on how to save money by increasing your credit score. 

For those of us in the housing market today’s magic credit score is a 620 or higher.

Buyers with 620 and above credit scores get the best interest rates.  They also have more loan programs available to choose from.  There was a day- not so long ago- that even 550 was high enough to be approved for a home loan but the banks have tightened the ropes.  They are still dealing with a rising foreclosure rate. They don’t want to take as much risk anymore. 

The new scores start to be available this spring.  If you plan to borrow money from a lending institution this spring or after, you’ll want to check out your credit score and see how the new FICO 2008 affected you.