What is UltraFICO? How it May Help your Credit.

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An independent, trusted leader in credit scoring, FICO, has announced a new credit scoring model called the UltraFICO Score. Beginning later this year in 2019, this new opt-in scoring offering will consider your balance and activity for your checking, savings and money market accounts. It will potentially boost your score up to 20 points which could be helpful dependant on your current score.

Through a partnership with Experian (one of the three major credit agencies) and Finicity (an independent credit agency), FICO claims this UltraFICO score can empower, you the consumer, to gain access to more loans and credit you may have been previously denied. It’s meant to provide your existing FICO score (which ranges from 300 to 850) a boost. UltraFICO is an additional option for lenders and creditors as well as it will provide them an additional way of checking into a person’s credit. They can opt to use this score to further evaluate whether or not to approve a loan and at what terms. 

How Is UltraFICO Different Than a FICO Credit Score?

While the algorithm FICO uses for their traditional score is proprietary and not disclosed entirely, we do know the basis of how your credit score is calculated:

     35% payment history

     30% amount of debt

     15% length of your credit history

     10% new credit

    10% mix of credit

Additionally, UltraFICO Credit Score uses the following to calculate your score:

-length of time you’ve had your checking, savings and money market accounts open 

-your account activity such as if you utilize overdraft options, direct deposits, and your savings habits

Your savings account can help your UltraFICO score.

TIP: For UltraFICO to benefit you, you must have a minimum balance of $400.

If you apply for a new credit card or loan and are denied using the traditional FICO score, the creditor may offer you the option of utilizing your UltraFICO score. As we’ve explained, this score weighs in the activity and balances you have in your checking, savings and money market accounts. While it will use the same 300-850 point scale, your UltraFICO score should be slightly higher than your FICO. Using these additional factors may boost your score just high enough where you are then approved for the card or loan. If you already have excellent credit, you have no need for the UltraFICO score to get approved or to qualify for good terms. But this supplemental information can be useful for you if you have fair or bad credit (ranging in the 500s to lower 600s).

Who benefits from using UltraFICO?

According to FICO, this new scoring model is helpful to two types of consumers.

1) Consumers who don’t have a long-established credit history.

2) Consumers who are trying to reestablish good credit after perhaps a financial mishap in the last couple of years. By adding financial behavior via bank accounts to the scoring equation, consumers are given a second chance to build their credit.

FICO states that using UltraFICO benefits lenders as well. It provides them a larger consumer base for loan products. FICO also believes that responsible financial behavior as it relates to bank accounts does correlate with the responsible use of credit. There should be no added risk for lenders to approve credit or loans to consumers with these raised UltraFICO scores.

Is there a downside to UltraFICO?

Some financial experts criticize this new scoring model as they believe it may overextend consumers financially. The current model is that you have to have credit to build credit. With UltraFICO, consumers would be able to build credit and take on new debts by simply managing their bank accounts. It would provide loans and credit cards to consumers who haven’t had credit before. If this sounds like you, just make sure you only use credit that you are financially able to pay back. Make sure you understand your finances and how to build a good foundation using credit

Additionally, critics say that because you are releasing yet more personal data to creditors, you may be increasing exposure to potential identity theft. If you opt to use UltraFICO or not, it is wise to take precautionary steps against credit card fraud and identity theft. 

When will UltraFICO become available?

According to FICO, Experian, and Ficinity, UltraFICO score will be piloted in early 2019 and fully launched mid-year. It is anticipated that if offered UltraFICO, you will be able opt-in online to link your accounts. If you are interested now in signing up to get your UltraFICO score when it becomes available, you can visit FICO’s website to sign up

Checking account activity could now help your credit score.Thinking ahead.

UltraFICO is all new and we don’t know everything about it yet. We do know it is a big change in analyzing credit and may have pros and cons.

If you think you might be interested in leveraging UltraFICO in your future, it is wise to think about your financial behavior as it relates to your bank accounts. Begin by watching your checking, savings, and money market account to ensure you maintain at least a $400 balance. Establish good savings habits and watch your spending from your checking account. And even if you never opt for the UltraFICO score, you’ll be putting yourself in a better financial situation anyway.