A friend of mine asked me if I had heard about the new FICO scoring system being implemented in 2019. I hadn’t at the time, so I started to do some research. It turns out this new system for FICO scoring can be beneficial to many consumers!
What is FICO?
So, for starters, some of you may be wondering what FICO even is. FICO, also known as Fair Isaac Corporation is a data analytics corporation that focuses on consumer credit. FICO generates a credit score for each consumer. “A FICO score is a type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant’s credit risk” (Investopedia).
Your credit report is then used by lenders and the like to determine if you are worthy of a loan and, if so, at what terms. Your FICO score is comprised of payment history, accounts owed, length of credit history, new credit and credit mix. FICO credit scores range between 300 and 850. A score of 650 and above is generally considered very good credit.
This all sounds pretty thorough, right? You may be wondering, then, why would they be making a change to the FICO scoring system? What else could they factor in?
UltraFICO
UltraFICO, the new FICO scoring system, allows consumers to have more control of what is factored into their credit score. UltraFICO enables individuals to link their checking, savings or money market accounts. By linking bank accounts, this gives insight into an individual’s financial behavior. Bank account history can help your credit score if you show the following:
- No history of negative balances/overdrafts
- Maintaining a bank account over an extended period of time
- Regularly paying bills or completing other banking transactions
- Proof of saving money and maintaining a healthy account balance
Over 15 million consumers who currently do not have a FICO score could be eligible to receive an UltraFICO score (https://www.fico.com/ultrafico/). This is great news for people who have not yet built a credit history, but have consistently been making and/or saving money and are generally financially responsible. Additionally, for those who see a boost in their credit score do to UltraFICO, they will hopefully benefit from lower interest rates and/or be able to be approved for future loans.
The odd thing about UltraFICO, which is different than the original FICO score, is that individuals have to opt in to get an UltraFICO score; at least, that’s how it will be working in the pilot phase. I also find it interesting that individuals can choose what accounts they link. Does that mean you can have bad financial habits in one account, but good in another, and only the good account would be factored into your UltraFICO score if that’s what you choose to do? It will certainly be interesting to see how UltraFICO plays out once it is officially rolls out.
If you are interested in getting more information once UltraFICO is available, you can sign up for updates at https://www.fico.com/ultrafico/ by scrolling down to the bottom of the page and filling out the form.
What are your thoughts on the new UltraFICO score? Do you love it or hate it?
