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by: HalJames
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When it comes to personal finances, your credit history plays a huge role. If you want to apply for a mortgage, for instance, your FICO credit score is going to be on of the big factors considered by lenders when it comes to approving or rejecting your application.

The FICO score is much discussed, but little understood. It is a mathematical calculation that takes in factors from your credit history such as payment timeliness and types of debt to produce a total score. Oh, and FICO has just changed.

Any person borrowing significant funds has run into their FICO score at one point or another. You might think you know everything there is about the FICO, but you don't. This is because the calculation just changed.

So, what is the big news on the restructured FICO calculation? Well, nobody is entirely sure. What seems to be happening is a reconsideration of debt and how the person in question pays it back.

FICO has traditionally been criticized for incorrectly weighing demarkations on credit scores. For instance, a person that was late on one payment was hurt in their FICO score almost as much as person who missed four payments.

Fair Isaacs appears to have taken this one late payment criticism to heart. The new calculation process does not hammer a borrower who has one late payment. On the other hand, it reduces the FICO scores of multipayment problem borrowers even more.

When there is a system in place, there is always a way to trick it. The authorized user function of credit scores was one such trick. It has now been removed from all FICO calculations.

Time is on my side said the old song. Well, it really is in the new FICO. The longer you have credit that is positive, the more it impacts your credit score. If you are a parent, establishing credit for your kids is a wise move. Just hide the credit cards.

I think, therefore I am. While this philosophical statement is true in a humanistic sense, your FICO score is proof of your being when it comes to personal finances. Make sure you understand how it works and what yours is before seeking financing.

About the Author

Hal James writes about the different types of mortgage loans available to borrowers at FSBOAmerica.org.

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