New FICO credit score uses checking and savings account history
You could soon achieve a higher credit score if you responsibly balance your checkbook.
Most Used Credit Score Developer FICO will roll out a new score next year that takes into account how you manage your checking, savings and money market accounts, as well as how you pay off your cards. credit and your loans.
This additional information could help improve the credit scores of some of the 79 million Americans who have poor credit histories, as well as the 53 million who have no credit scores under the traditional FICO model. This, in turn, could help them qualify for a credit card or loan.
“We focused on financial inclusion, and what we’ve done has the potential to improve access to credit for the majority of Americans who participate in it,” says Sally Taylor-Shoff, vice president of score at FICO. “Consumers new to credit as well as those who have already had financial difficulties, these are the groups that will benefit the most from the new UltraFICO score.”
How it works?
If your credit score isn’t high enough to qualify for a loan or credit card, or is about to get a better rate, a lender may suggest that you use your banking activity to generate a score. UltraFICO. You can also choose which accounts – checking, savings, or money market – will be included in the recalculation. The score uses the same range of 300-850 as other FICO scores.
“It’s like combining peanut butter and chocolate,” says John Ulzheimer, a credit expert who previously worked at FICO and Equifax. “(These are) two useful data sources, combined into one score.”
Experian, one of the three major credit bureaus, will gather your bank account data using Finicity, a financial technology company, and send the new score along with a summary of your bank accounts to the lender for a second. Evaluation. Experian will retain bank account data to resolve any disputes regarding accuracy.
It’s possible that your credit score will drop after you add new banking information, according to Taylor-Shoff, so it’s important to understand when your bank account could help you.
What is a good bank account?
The main factors are the average account balance and the history of overdraft accounts. Those who maintain an average balance of $ 400 and show no negative balances in the past three months will benefit the most from the UltraFICO score, Taylor-Shoff says. Other positive factors that FICO considers:
- Have more deposits than exits.
- Have an open and active account for some time.
- Regularly pay bills such as utilities and rent from these accounts.
Seven in ten people who demonstrate responsible checking and savings account behavior may improve their score on the UltraFICO scoring system, the company said, some up to 20 points. This can result in a lower interest rate or the difference between an approval and a denial.
The new score begins its pilot program early next year. FICO plans to offer the scores to all lenders by the summer. Pentagon Federal Credit Union, the third largest credit union in the United States by assets, is participating in the pilot program.
Taylor-Shoff said many lenders are interested in the new score. But it remains to be seen how quickly lenders will embrace this additional rating system. For example, the last FICO credit score – FICO 9 – was released four years ago, but the previous version of the score – FICO 8 – remains the most widely used.
“You can build the best mousetrap in the world, but if no one buys it, it doesn’t matter,” says Ulzheimer. “In some ways, FICO can be a victim of its own success. “