November 2, 2018 | by Katie Claflin
Categories: Financial Education, Lending, Savings
Last week the Fair Isaac Corporation (FICO), the company that created the commonly used FICO credit score, announced that it will soon test out a new scoring model known as the UltraFico.
The goal of UltraFico is to expand credit options for consumers whose traditional credit score may not qualify them for a mortgage or other financing. With help from articles posted in HousingWire and the New York Times, we want to take this opportunity to answer a few commonly asked questions about the new scoring model.
What is UltraFico and how is it different from the traditional FICO credit score?
Unlike the traditional FICO credit score, the UltraFico score will include a consumer’s money management, such as bank balances and cash management behavior, when determining the overall credit score. The new score will consider factors including the age of a consumer’s accounts, frequency of activity and history of saving.
In comparison, the traditional FICO score only includes information about a consumer’s history of repaying debt, such as credit cards and student loan balances.
When will the UltraFico score be implemented?
UltraFico will be tested out next year with Experian, one of the three major credit reporting bureaus. It is still unclear if TransUnion and Equifax, the other two major credit reporting bureaus, will offer the UltraFico.
FICO has already identified Pentagon Federal Credit Union, one of the largest credit unions in the country, as a participant in the pilot program and expects to make the score more widely available next summer.
How do I get an UltraFico score?
Consumers must opt in to the UltraFico score by giving their lender permission to collect information about their cash management habits.
How much could my credit score improve if I use UltraFico?
According to FICO, some consumers may see their credit scores increase by 20 points or more, depending on their financial information.
Who will benefit from the UltraFico score?
Not everyone will benefit from the UltraFico score. According to FICO, people with high credit scores likely won’t see any difference with an UltraFico score.
UltraFico will be most helpful for consumers with scores from the upper 500s to low 600s. Under the current credit models, these consumers often fall just short of a lender’s cutoff for mortgages or other loans. Additionally, consumers with at least a $400 bank account balance, and no history of negative balances, are likely to benefit.
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Great info. I know a lot of responsible people that just can’t get their credit score up, so this should help. It’s a tough situation to be in when you want to get your score up, but you also don’t want to unbalance your debt to income ratio. It’s a fine line. I hope this measure actually helps.