What to Know About UltraFICO
FICO® recently announced that a new consumer credit score, UltraFICO™, would be launching this year. This is positive news for people who have decent financial habits and want to gain access to credit, but have very little or a less-than-perfect credit history.
If you’ve ever applied for credit, you likely know about the original FICO score. The score uses data provided by the three major credit bureaus – Experian, TransUnion, and Equifax – to determine your creditworthiness. The catch is, in order to have a FICO score in the first place, you must have at least one credit account that has been open for a minimum of six months. According to FICO, over 15 million consumers who currently don’t have a FICO Score could receive an UltraFICO Score. UltraFICO was conceived to help people who fall in this gap.
What is UltraFICO?
The UltraFICO score is an opt-in credit model that uses consumer contributed data, such as your checking, savings and money market account activity, to supplement data already in your credit report. The idea is that if a lender can see that you’re responsible with the money flowing in and out of your accounts, and that you have good savings habits, you’re more likely to be a responsible borrower as well.
How does UltraFICO work?
If your traditional credit score gets you a less-than-favorable rate, or you aren’t approved at all, you can agree to let FICO electronically access your account information in order to generate the UltraFICO score.
The UltraFICO score looks at all the factors the original FICO score does – payment history, outstanding debt, length of credit history, types of credit you’ve used, and the utilization of new credit. FICO hasn’t announced how much adding checking and savings account information for the UltraFICO will affect those factors. But we do know the goal is to make credit available to more consumers. And in the event a consumer is denied credit after the UltraFICO is considered, he or she will get to view the UltraFICO score and the factors that contributed to the denial.
Keep in mind that, to start, FICO will work with just Experian to calculate an UltraFICO. This means the lender you work with must agree to only use your Experian score in its credit decision.
Who can benefit with an UltraFICO score?
If your credit score is above 700, you shouldn’t need to have an UltraFICO because major lenders will likely be willing to let you borrow money. For those consumers with credit scores between the 500s and 600s, the UltraFICO will be a great tool to help increase odds of having their credit application approved. According to FICO, seven out of 10 consumers that show an average savings of $400 without negative balances in the past three months see an increase in their score with UltraFICO.
Remember that even if you’re approved for credit, it’s still important to carefully consider your ability to repay the loan. And keep in mind that your credit union has always looked beyond just a credit score to help you achieve your financial goals. If you have questions, talk to a representative about your options.