What Does FICO Really Mean? Will FICO Credit Reporting Software Have to Be Overhauled in the New Economy

[Corey Dutton]

Many people don’t know that FICO is a company that provides a credit reporting software that is widely used. With so many people having major credit issues as a result of the financial crisis, the FICO credit reporting software, and other software used to issue credit, may need a rehaul for issuing new debt in the future.

I don’t know much about how scores are calculated, given that each software program has a unique way that it calculates credit scores. For example, auto loan underwriters use a different credit reporting software than the FICO software typically used by mortgage lenders when underwriting a mortgage loan.

My question is, will credit reporting software programs like FICO have to be rehauled to make adjustments for marks on the credit that have occurred as result of the financial crisis? Will certain items that have grossly affected credit scores prior to the crisis be given less weight when calculating credit scores in the new economy?

I don’t claim to be an expert on this topic, but I feel something has to be done about the way credit scores are calculated going into the future. In the wake of 2008, one of the worst financial crisis in U.S. history, my gut tells me that you can’t rely on traditional methods for calculating people’s credit scores anymore. The old rules don’t seem to apply in this new economy.

I’m sure some of you are experts on this topic, so please share your insight. Will popular credit reporting software such as FICO have to be rehauled for borrowers in the new economy?