Transcript: Credit scoring changing

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired.

Anchor Intro: If you borrow money, you probably know that your credit score is important. The company behind credit scoring, Fair Isaac, recently announced changes in the way they’ll soon be calculating your score. reports on what the new methods mean to you.

Voice over 1: Whether you’re looking for a house to buy, a place to work or even the best deal on car insurance, your credit score can make a difference.

Voice over 2: Because lenders, employers and insurance companies might look at it to determine what kind of risk you are.

Voice over 3: While the exact formula behind your score is secret, according to the company that does them, Fair Isaac, about 65 percent of your score is based on how much you owe and how well you’ve done paying it back. The other 35 percent is split between the length of your history, the types of credit you’ve had and new credit and inquiries.

Voice over 4: But this spring Fair Isaac is tweaking that model. They’re going to start giving more weight to people who use different types of credit, like revolving loans … common in credit cards and installment … common in mortgage and car loans.

Voice over 5: They’re also going to be a bit more forgiving if you’ve messed up in the past, but done better in more recent years. Or paid late on one account while paying others on time.

Voice over 6: So when these score changes happen this spring, your FICO credit score might improve if you use different types of credit successfully … and you have older, isolated late payments. But it might go down if you have more numerous and more recent lates.

Fair Isaac is predicting these changes will improve more scores than it hurts. While you can’t get a free look at your credit score, you can see the history it’s based on: just go to