New UltraFICO Score Could Boost Credit Access for Consumers

A new FICO credit score, launching in 2019, could be good news for consumers who don’t quite have the credit scores they need to qualify for a financial product or for the terms they were hoping for.

The UltraFICO score is an opt-in credit model that uses information from your checking, savings or money market accounts to supplement data already in your credit report. The information being considered includes how much you have in savings, how long the accounts have been open and how active they are. It’s meant to boost your existing FICO score, which ranges from 300 to 850.

If you are already in the excellent credit range, and don’t need additional points for approval, or to qualify for the best terms, it won’t be offered to you. But this supplemental information can be especially helpful for consumers with scores in the upper 500s to lower 600s, considered bad to fair credit.

The UltraFICO score — distributed by credit bureau Experian, one of three major reporting agencies — will be pilot-tested “at a handful of lenders,” including online, nontraditional lenders as well as credit unions, starting in early 2019, said David Shellenberger, senior director of scores and predictive analytics at FICO.

Here are answers to some common questions about the new credit score:

Who will the UltraFICO score help?

The UltraFICO score, Shellenberger said, is almost like a “second-chance score” that tends to benefit two groups of consumers:

Those with “thin” files or little credit history.
People trying to rebuild after a personal financial crisis.

Credit newbies are more likely to see a significant benefit, assuming they have not had a negative account balance in the past three months and maintain a decent savings balance. (Shellenberger referred to a “moderate amount” of savings, meaning $400 or more.)

FICO said that among consumers who had kept a positive balance in a deposit account and maintained an average of at least $400 in a savings account, 70% improved their scores with the addition of that information. Shellenberger said 40% of credit newbies saw an increase of 20 points or more. Among those with previous financial distress — such as an account in collections — one in 10 saw an increase of 20 points or more, he said.

FICO scores have been rising in general. The most recent average score, released in September, was 704, up 3 points from a year ago. According to data from FICO, 22.6% of consumers had scores between 600 and 699 — prime candidates for credit approval if they could manage just a few more points.

You’re likely to be offered the option of UltraFICO if:

Your score is just a few points below a cutoff.
The lender is using an Experian credit score. (Right now the only distributor is Experian.)

Shellenberger said FICO plans to make the UltraFICO generally available later in 2019, likely summer.

What do deposit accounts have to do with credit?

The new score looks at deposit accounts, such as savings accounts, as well as some account activity (PayPal and Venmo, anybody?).

“It almost seems like this allows the really big, kind of ‘dinosauric’ lenders to compete with the more nimble online lenders that rely less on traditional credit report information and more so on cash-flow metrics,” credit expert John Ulzheimer said.

Ulzheimer said he is intrigued with the new score and sees both pros and cons.

The biggest pro is you can get credit for the banking that is done outside traditional institutions.

The biggest drawback? Releasing yet more personal data and trusting that it will be adequately protected.

Ulzheimer believes that UltraFICO is most likely to be offered to people who were denied approval, but barely — “almost there, but not across the finish line.”

UltraFICO vs FICO XD: What is the difference?

FICO has another model that is designed to help score more people and that uses nontraditional data.

The FICO XD score, which is still being used, generates scores to help people who do not have traditional credit scores qualify for credit cards.

The XD score, however, does not require that you have a deposit account as the UltraFICO does.

Another difference is the UltraFICO is designed for broader use — loans as well as credit cards. So the scores can serve slightly different consumers.

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