Your credit score may improve under the new rules outlined by the Fair Isaac Corporation. If you already had good credit and have low balances on your credit cards, have installment loans (e.g. car or mortgage) and make regular timely payments then your score may improve.

If you can pay, you are rewarded with more credit. If you have no credit history or one with only credit cards and large balances then your score will decrease. It doesn’t seem fair but that is what will happen.

The divide will be greater between those who were able to make better financial decisions (or chose to) and those who didn’t.

The new system has been in the works for over a year.

Having money makes a difference. If you have none or have bad credit, your credit score may decrease if you do not pay your bills on time or have only credit card debt.

Establishing a good credit history is also an important factor that a score cannot determine. A great salary does not mean that someone is fiscally responsible and having a small salary does not mean that someone is a deadbeat.

On paper you may look like a good credit risk but you may stop paying for an unknown reason. This makes a difference. For those who have difficulty repaying their mortgage loans, even if they had paid their bills before and seemed like a good credit risk, decreasing equity in their home may make people just walk away.

This is a hard decision to make but it will affect your credit score in the long run but by the time it really shows up on your credit in about three months or more by which time a person could already be deeper in debt.

Another change to the scoring is that “authorized users” will not be able to ride someone else’s good credit coattails to improve their credit. So if you are an “authorized user” and have used that to boost your credit score, this will no longer be included in the score calculation.

This is what Fair Isaac has to say about authorized users…

From our long experience working with credit card issuers and consumers, we believe that many authorized user accounts are held by family members. Unfortunately, consumer credit reports don’t indicate why an authorized user is being added to a credit account. So the FICO score is unable to distinguish between an authorized user who is a family member, and an authorized user whose only connection to the primary user is a desire to defraud lenders. To help protect lenders from fraudulent use of authorized user accounts, we decided to remove authorized user accounts from consideration by the FICO score, starting this fall [2007].

Basically, financial education and fiscal responsibility are important. There is a greater divide between the haves and have-nots. Have-nots who tried to finance their way into seeming like someone who had money will be in for a rude awakening when all of the changes to credit scoring take affect with all three of the credit reporting companies.