Fair Isaac Corp. says it is changing the way it calculates FICO credit scores to better predict the ability of a borrower to repay loans.

The new procedures for calculating “Classic FICO” scores, to be implemented in September, should increase their predictive power by 5 percent to 15 percent, Fair Isaac said in a press release.

The largest increases in predictive power will be seen among originations and new accounts, subprime borrowers, and borrowers with “thin” credit files, Fair Isaac said.

Heavy reliance by mortgage lenders on FICO scores has been cited as one possible reason for an increase in delinquencies and defaults in subprime mortgage loans. Critics say the scores are easily manipulated, and that their usefulness in predicting a borrower’s ability to repay a loan has diminished.

Fitch Ratings, which analyzes pools of mortgage loans that are sold to Wall Street investors, has reported that the gap in FICO scores between loans that default in their first year and those that are still current dropped from 30 points in 2003 to 10 points last year.

Fair Isaac has said the scores themselves are not to blame for rising delinquencies and foreclosures in subprime loans, but that lenders misuse or ignore them. The company said U.S. businesses have used more than 100 billion FICO credit scores “to make smart decisions about their customers and prospects.”

The new Classic FICO scoring model won’t change features such as the score range of 300 to 850, score reason codes, minimum scoring criteria, inquiry treatment, and related model parameters, Fair Isaac said, and lenders should be able to use the score with minimal changes to their operating systems.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription