FICO 08

AAA

DEFINITION of 'FICO 08'

A credit-scoring model introduced in 2009 by the FICO company to provide a more accurate picture of a potential borrower's ability to repay a loan. In particular, it is meant to provide a more accurate assessment of low-risk consumers whose scores were blemished by minor delinquencies, consumers with minimal credit history and consumers with poor credit.

INVESTOPEDIA EXPLAINS 'FICO 08'

The new formula ignores minor slipups, such as delinquencies with an original amount of $100 or less. It also weeds out people who had been inflating their credit scores by paying a stranger with better credit to add them as an authorized user on one of their credit card accounts (a practice known as "piggybacking"). The range of possible credit scores remains unchanged under the new system.

RELATED TERMS
  1. Hard Inquiry

    A type of credit report check that may lower an individual's ...
  2. Credit History

    A record of a consumer's ability to repay debts and demonstrated ...
  3. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  4. Delinquent

    The failure to accomplish what is required by law or duty, such ...
  5. FICO Score

    A type of credit score that makes up a substantial portion of ...
  6. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
Related Articles
  1. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  2. Credit & Loans

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  3. Options & Futures

    6 Major Credit Card Mistakes

    Avoid these pitfalls to keep your credit score healthy and your debt under control.
  4. Credit & Loans

    Why Your Credit Report Errors Will Now Be Easier To Fix

    Equifax, Experian and TransUnion have reached an agreement to make changes to how they handle credit report errors and unpaid medical bills.
  5. Credit & Loans

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  6. Savings

    Why Do Credit Cards Expire?

    Credit cards expire for more reasons than you could imagine – including, so you don't forget you have the card.
  7. Credit & Loans

    Meet The Company Behind Your FICO Score

    There are other credit scores that evaluate lending risk, but FICO is still the choice of most U.S. lenders.
  8. Stock Analysis

    How MasterCard Likely Earned a Spot in Your Wallet

    An in depth look at MasterCard and its future prospects as an investment.
  9. Credit & Loans

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.
  10. Credit & Loans

    Cash Back, Miles or 0% APR: Comparing Card Perks

    Consumers have a lot of choice these days when it comes to credit card rewards, including cash back, airline miles and introductory periods of 0% APR.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center