FICO to test new type of credit score

Marco Green
October 23, 2018

Fair Isaac Corp., the company behind the widely used FICO score, announced Monday that it will begin testing a new type of credit score next year with credit reporting agency Experian and technology company Finicity.

FICO is planning a change in credit score calculations to include the management of checking and savings accounts, potentially helping thousands of borrowers. Banks are not required to use UltraFICO as a scoring mechanism. That should ultimately result in more loan approvals, according to the Journal. The Wall Street Journal earlier reported on the scoring system. Many lending organizations such as credit cards, mortgages and auto loans are based on your FICO score.

FICO, along with Experian and Finicity, announced a new credit score system Monday at the Money 20/20 U.S. conference.

Borrowers now have little control over what's in their credit reports, save for the ability to contest information they believe is inaccurate.

If a consumer's traditional number falls short, a lender can offer to have the score recalculated to reflect banking activity.

To improve their Ultra-FICO score in the new model, the two most important things a consumer can do is keep over $400 in the bank, and don't overdraw your account, according to Jarvis.

Of U.S. consumers with credit scores, a record 58.2 percent had a score of 700 or higher on a scale that tops out at 850.

Essentially, you can apply for credit in the same way, but if your application gets rejected, you can ask for an "Ultra-FICO" score. Lenders may have different cutoffs, but Experian considers scores under 670 subprime.

Better access to credit The partner firms believe that the new score will provide better access to credit for most Americans, especially those in the grey area of upper 500s to lower 600s; and those with relatively new or previously distressed credit profiles.

There's a risk that the new scores could make some iffy borrowers look more creditworthy than they are.

Other reports by Click Lancashire

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