Owning a home is the American Dream. To do it, most of us have to borrow money from a lender. Our credit plays a big factor in whether a lender is going to give us the money to make that purchase.

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.

Everything you know about the FICO score is wrong. How can I say that? Simple, the FICO score has recently been revised and new scores are being calculated. This may mean good or bad news for those in need of credit.

FICO has always been criticized for being a bit unforgiving and structured. So, do the new modifications change this? Well, the issues being focused on are really more oriented towards the weight of certain events.

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 being given more weight in the new FICO calculation. Specifically, the longer you have had good credit, the better. Minor blemishes over the years are discounted. If you have kids, start establishing their credit early on.

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.