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The New Fico 8 system

By Maria Boghi

Real Estate Agent

October 30, 2010 12:27 PM

The newest credit scoring product, the FICO 8 Mortgage Score, is supposed to do a better job at predicting if homeowners will keep paying their mortgages.

The new FICO 8 score system offers mortgage lenders "more precise risk assessment tailored for the real estate market," according to Fair Isaac Corp., the Minneapolis-based company that devised the FICO score.

The widely used credit score is an important factor for homeowners seeking to refinance their current mortgage or a mortgage to a purchase home. While a 700 score is considered good, Borrowers typically need a score around 620 or 650, depending on other factors like their amount of home equity, to obtain a mortgage loan.

he FICO 8 Mortgage Score keeps the same 300 to 850 range but is designed specifically for mortgage lenders and servicers, who administer the loans.

The new score, according to Fair Isaac, helps mortgage servicers spot homeowners at risk of defaulting and seek solutions to avoid foreclosures. It might be able save the mortgage industry $1 billion in foreclosure costs and help over 100,000 homeowners keep their homes.

Placing greater emphasis on mortgage payments, the new score helps mortgage services spot at-risk homeowners by pushing homeowners who are over 90 plus days late into lower scores.

The new score takes into account extra data sources on consumer credit to improve its predictive ability by up to 25 percent, the company says. The new score is also supposed to be easier for lenders to explain to mortgage borrowers.

"The FICO 8 Mortgage Score's broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,"