FICO says tweaks to formula will alter scores

Your credit score - that all-important passport within the financial world - may be about to change. And it won't necessarily be because of anything you did or didn't do.

Fair Isaac Corp., the company that creates the widely used three-digit FICO score, is tweaking its formula. Consumers in good financial standing should see their scores bounce a bit higher.

But millions of people already in financial distress may experience a fall - meaning they'll have more trouble getting loans or will pay more for them.

Lenders use FICO scores to judge how likely you are to make timely payments on your loans. But they're also used in lots of other ways and can influence how much you pay for car insurance to whether you'll qualify to rent a new apartment.

The changes don't alter the main ingredients of your score, but they do take a more finely tuned view of certain financial behaviors that indicate signs of financial weakness. For example, consumers who consolidate credit card debt into a personal loan and then run up the balance on their cards again will be judged more severely.

"The new scores reflect nuanced changes in consumer credit trends that we observed from our analysis of millions of credit files," said Dave Shellenberger, vice president of product management at FICO, whose scores range from 300 to 850 (the higher, the better).

FICO adjusts its scores every few years, drawing on consumer behavior and patterns that emerge from the vast trove of data it tracks. This time, the company is offering two new scores, FICO 10 and FICO 10 T, and both differ from the previous formula.

FICO says the new scores will make it easier for lenders to gauge a borrower's risk.

Some of the changes, like carrying a personal loan as well as credit-card debt, affect both new scores.