Consumers with low credit scores may soon have a way to boost that three-digit number! A new product is supposed to become available in Summer 2019 and it will be geared towards consumers with low credit scores. Currently, potential lenders use your credit report, which includes your credit score and credit history, to see if you have paid your mortgage, personal loans, credit cards, and other debts on time. Your credit score is then calculated off of all of your debts and it’s broken down in five different categories which include: Payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%) - the different types of credit that you have. Lenders us this information to determine your credit risk and the interest rate that you would be charged, should they approve your loan or credit card.
Here’s the change with regards to the new scoring method, UltraFICO™. It will have a different focus on your credit and will allow you to show lenders your financial behavior for areas that are not included on a traditional credit report. Once consumers opt in to the alternative scoring method, their banking behavior will be used to calculate their UltraFICO™ score. These areas include:
Length of time of their bank account
Evidence of savings (an average of $400 min. balance)
The frequency of activity
On-time and regular payments
The voluntary scoring method is intended to boost the number of approvals for credit card, personal loans and other debt by considering the consumers cash transactions (their banking behavior), which may indicate how likely they are to repay the debt. Before enrolling, consumers need to remember that they would be sharing their sensitive checking and savings account information and data. For more information and to keep up to date on when the new scoring method will be rolled out to the public, visit www.FICO.com/UltraFICO