This is a guest post from Greg Vandagriff. Be sure to check out his great new site, Equidash!

Last week I discussed the circumstances which led to FICO 08. Essentially the bastard child of Fair Isaac Credit Organization and mortgage lenders, the new credit scoring model will allegedly be a better predictor of defaults on mortgage loans. One could argue that the entire affair is nothing more than a desperate publicity stint aimed to placate lenders while still keeping them chained like dogs to the titan of credit scoring. Regardless of the intentions behind the revision, it is nevertheless beneficial to examine what it means for your score.

First of all, the newest model, once adopted, will polarize your score more efficiently. What this means is that the penalties to your score for minor infractions, such as a 30-day late, will be substantially lessened; whereas the penalties for more severe delinquencies, such as a large balance going to a collections account will be substantially greater. Overall, FICO claims, this change will result in most people’s credit scores increasing by a small amount. Three cheers for higher credit scores!

The second, and most publicized and potentially the most dramatic change to the model is the elimination of authorized user accounts from the credit scoring equation. Previously, if one were signed onto an account as an authorized user, one could quickly “inherit” the good credit of the primary account holder. This practice, often referred to as “piggybacking” was commonly used by parents to help their children build good credit at an early age by signing them on as authorized users. On the other hand, however, the credit repair industry is filled with shady operations that allow those with poor credit to improve their score by paying a certain amount of money in order to “piggyback” as an authorized user on the account of someone with impeccable credit. It is said that this practice dramatically inflated otherwise unremarkable scores.

The elimination of piggybacking means that if a substantial portion of your credit history is derived from authorized user accounts, you can expect to see a drop in your scores once the newest revision is implemented by lenders across the country. Consequently, you would be well advised to apply for additional lines of credit while you still can so that you at least have the means to build a powerful profile of independent credit.

Publicity stint or legitimate revision? It’s your call. Either way, the effects of FICO 08 are likely to be felt by a significant portion of the credit market when it is fully integrated by all three bureaus.

Related posts:

1. New FICO Score Information
2. FICO’s Fall From Grace
3. FICO vs. VantageScore and the Truth About Free Credit Scores
4. Why raise your Fico score?
5. Everything you wanted to know about Fico Scores*