How often do you change your credit score model

[Anonymous]

I have a question already.

I understand that Fair Issac creates a formula for my credit scores by basing my credit history against the national "average", but how often does Fair Issac change this model.

Given the upswing in foreclosures and increase in bankruptcies, and dependencies on credit cards in the past few years, I find it hard to believe that the national average for credit score is still over 700. It seems unfair to base someone's credit file against this number.

[Barry]

I know this is going to sound confusing but the FICO scoring formula doesn't actually use 'national averages' in determining how certain credit bureau information impacts your score.  Instead the scoring formula is based solely on the extent to which the credit bureau information in your credit report is 'predictive' of future risk, regardless of national averages.

So while national average information is interesting to note in terms of where you stand compared to the rest of the population, these averages have absolutely no bearing on how the scores are calculated or how they're looked at by a prospective lender.

And while the forumula is updated every few years, the national average score has remained around 720 for many many years and shouldn't be expected to change dramatically anytime soon.  This is because so many different scoring factors are considered by the forumula and such a large (>1 million consumers) amount of data is used in developing the forumula, none of the economic trends over the last 15+ years have had enough of an impact on the 'entire' US population to make much of a dent in this average score.

In addition, not only doesn't the scoring forumula depend on the average national score, neither do lenders in setting their lending criteria.  Instead they look at the level of risk they incur at a particular score level based on their own past lending experience.

So basically, don't worry about the average score as it will have virtually no bearing how your credit is looked at.

Confusing?  I know that's a lot to swallow but you asked a complicated couple of questions.  Hope it helps.

[Anonymous]

Are there mortgage industry peers that asked FICo to develop the mortgage scoring model? If so do you know who they were i.e. Fannie Mae, Freddie Mac, FHA, Banks?

[haulingthescoreup]

There actually isn't a mortgage scoring model, per se. FICO developed a basic formula for each CRA, according to their requirements, and those basic models are what are used by mortgage lenders. The scoring formulas are periodically updated, but it's then up to each lender whether they want to purchase the new formula or keep going with the older version.

The CC industry and the auto loan industry requested tweaked versions of this basic/classic formula for their uses. But again, the so-called mortgage formula is just the pure, basic FICO formula. hth

Welcome to the forums, by the way!