UltraFICO

Fair Isaac Company (FICO) along with Experian and data aggregator Finicity announced last week that starting in January 2019 they will begin pilot testing a new credit score called “UltraFICO.” In addition to the information the scoring models already take into consideration, this new score will also factor in the money a consumer has in their checking, savings and money market accounts.

According to the head of scoring at FICO this new model is designed for two groups of consumers: the first is very young people just starting out who have very little or no established credit history. The second group consists of consumers who are rebuilding their credit. They have established credit but have had some “dings” in the past or perhaps a bankruptcy and are trying to get back on their feet. However if someone has current late payments, charged off accounts, collections, etc. this new model will probably not benefit them much.

The way it works is if a consumer has their credit pulled by a bank or lender and it is not quite up to par they can request to “opt in” via the UltraFICO app that is being created to have the UltraFICO model pulled as well. Once the borrower has opted in to receive this score they then choose the accounts that they want to be considered in the score. If they have at least $400 in the checking and savings account and no over drafts the UltraFICO score could come back 20% higher than another model’s scores. For some this could help them get a better interest rate or could even be the difference in getting a loan or not.

How will this possibly benefit those looking for a mortgage? That remains to be seen. Right now there are a few larger banks/credit unions that are going to be part of the pilot phase. And some of them do service their own mortgages. However for the majority of mortgages this model would have to be accepted by Fannie Mae and Freddie Mac. But since they haven’t even accepted FICO 09 yet, the chances of them accepting this score looks to be pretty slim.

There are also other possible issues with this new model: since a person is turning over all their banking information it could make them more vulnerable to identity theft. Also, the credit bureaus are not subject to bank-like regulations; with some regulators feeling that if the credit bureaus and Finicity are going to have access to this information that they should be playing by the same rules. Another worry is that it may put some consumers in a more precarious financial position. Having money in the bank doesn’t necessarily make one a good credit risk and if the credit report already has some issues, especially as far as making late payments, the borrower could be overextending themselves and putting themselves at more of a risk for the possibility of late payments or defaulting altogether.

Right now it’s a “wait and see” game as to how many consumers this may help and how much it will help. Some tweaking may need to be done to the model after the pilot phase which is expected to last until mid 2019 when it is estimated to become more widely available.

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