Credit scoring rules changing.

• Position: FICO

It always is a good idea to be vigilant about credit scores but, if you are planning on borrowing in the coming months, you might want to monitor your credit behavior a little more closely. Fair Isaac Corporation, the company that created the FICO score, has come up with a new version of its landmark credit scoring method that might have serious consequences for those who are planning on borrowing for a home or establishing any other new credit in 2009. The revised FICO particularly is focused on balances, not only on-time payment records.

The revisions, explains the Financial Planning Institute, Denver, Colo., will allow a bit of leniency on late payment--something that might affect more than a few consumers with the downturn in the economy. Obviously, this does not mean that someone can pay late chronically, but once or twice will not have the same impact as in earlier FICO versions.

Yet, credit utilization--essentially the amount of credit a person actually is using relative to credit limit--is a much bigger deal simply because high balances are so prevalent at present. From the lenders' perspective, high balances mixed with a tough economy mean a higher risk of default among customers. A good target utilization rate for all revolving credit accounts is no more than 50% of the credit limit and, if you can get it significantly lower than that over time, even better. The lower the credit utilization, the better the score.

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Ordinary Americans who do not meet that under-50% goal should not be applying for new credit or refinancing for awhile. In fact, since most lending institutions probably will continue their strict lending requirements due to the recent credit crunch, it might be a good idea to defer borrowing goals in favor of reforming your credit behavior. Instead of bemoaning your tougher chances of getting a loan for a home or a car, why not use the current environment to launch a credit makeover that will position you for a better shot six months to a year from now?

Here are some ideas:

A score of 740 earns the best rates. It is said that credit scores of 700 and up will earn best customer status with lenders. Not true. For the lowest rates and best terms, the credit...