You might have a higher credit score than you think! Fair Isaacs Corporation in a partnership with CoreLogic created a new credit scoring system that includes customer's credit history and information from public records.
The two companies believe that historical financial data is best combined with public information like tax liens, and short-term loans previously "off-limits" for old credit scoring models. According to the public statement, the new scoring system is more favorable to borrowers. While fewer than 20% of people have "perfect" credit of 800-850 today, the new model says as many as 44% of Americans have a perfect credit score.
The current FICO scoring algorithm works best for people with established credit history, long-lived accounts, and a variety of financial products that report to the credit bureaus. Many people do not have this kind of diversification and experience, and thus pay for it in the form of a lower credit score.
Credit seekers who previously had little or no credit now have more records from which credit scoring companies can come to a conclusion about a consumer's risk level. Property owners who have a paid off house, for example, might have no benefit of a mortgage on their credit report. However, thanks to property tax records, the new FICO model can see that property taxes were always paid on time and in full - signs of a good credit risk.
The new credit scoring model won't replace the FICO score everyone knows any time soon. It may not come out at all - but all signs point to a new credit scoring system less dependent on pure financial data. In recent years, new scoring models were implemented to gauge insurance risk. A new model is currently being designed to give scores for health and wellness.
With more data and more ways to test new algorithms, credit scoring models can only become better from here.