The New UltraFICO Will Give Millions of Consumers a Score Boost

Since it was created, the FICO score has been based only on consumer credit history. The score uses past credit information that's compiled by major credit bureaus to calculate a credit score that predicts a consumer’s likelihood of defaulting on a new credit or loan obligation. Next January, FICO plans to release the UltraFICO score, a score that could make it easier for millions of borrowers to qualify for loans they wouldn’t otherwise be able to qualify based on the traditional FICO score. The score is a partnership between Experian, one of the three major U.S. credit bureaus; FICO; and Finicity, a finch company.

Current FICO score is based only on borrowing history present on your credit report and it doesn’t consider your ability to pay. That is, it doesn’t take into account your income your bank information. It’s not a problem for consumers with good credit scores. People with high credit scores are able to qualify for most credit cards and loans with no problem, and often for low interest rates and down payments. However, if you have a thin credit file - meaning you don’t have many accounts - or you have negative information on your credit report, it can be difficult to qualify for credit cards, loans, and other credit-based products and services. 

According to FICO, 79 million Americans have subprime credit scores, that is credit scores below 680, and another 53 million Americans don’t have enough information on their credit reports to generate a FICO score at all. Consumers need to have at least one account that’s been active in the past six months to generate a credit score. 

The UltraFICO score will use your savings, checking, or money market account to generate an updated credit score that includes your banking information. The score will consider your current balance, length of account history, frequency of transactions, and history of overdrafts in addition to traditional credit information. If you have a credit card or loan application denied, you can ask for an UltraFICO score. FICO suggests that 7 out of 10 consumers who are responsible with their bank accounts could improve their credit score with the UltraFICO. Using the UltraFICO would also allow banks to increase approvals for credit cards, loans, and other debt products.

Bank information hasn’t traditionally been a factor in credit scores, which means that low balances or previous overdrafts wouldn’t hurt your credit score. Once the UltraFICO score is released, it becomes more important for consumers to manage their bank accounts well. Your UltraFICO score could rise by having several hundred dollars or more in the bank, keeping your bank account open for awhile, and avoiding overdrafts.

Note the UltraFICO is an opt-in product only. Once you give permission, Finicity reads your bank information then combines it with credit information from your Experian credit report. FICO provides the logic to generate your UltraFICO. Unless you give permission, FICO won’t have any access to your bank information. In that case, lenders will use traditional credit scores and application information to make lending decisions.

So far, no information has been released about the credit score breakdown or the credit score range. The score will be launched as a pilot in early 2019 and will be rolled out to additional lenders in mid-2019.

Source: FICO