New FICO for Mortgages - BEACON Mortgage Score

Well, it had to happen, Fair Isaac, scratch that, FICO [the new name for the company] worked with Equifax to develop a better FICO score for lenders.

Basically, they took the BEACON® Score and tweaked it and called it the BEACON® Mortgage Score. Low and behold, it performs better for mortgages. Why? Financial institutions have known that tweaking a score model for its direct application tends to predict risk better. This is why there are bankcard FICO scores for credit cards. Credit card companies care more about credit card default risk so they weight their models accordingly. Now, it’s happening in the mortgage business and the result is better prediction of mortgage defaults.

Is this huge news? Will it affect me?

This still means that users will have to manage all their credit wisely. For those asking the tough question of which do I pay off first. That depends. If you are thinking about renting for the next 10 years, than worry less about your mortgage track record and pay off your credit cards. If you know you need to be in a new mortgage in the next 5 years, you probably want to prioritize these payments over credit card bills.

In the end, the consumer still needs to structure their lifestyle so ALL their bills are paid on time. Don’t worry about all the flavors of FICO scores, there are too many to keep track of them all. Just keep paying your bills on time and try to keep your balances low.