From becoming first-time homeowners to securing a new set of wheels, credit plays an important role in helping all of us live out our dreams. And the new UltraFICO™ Score from Finicity, Experian and FICO, which empowers borrowers to build and improve their credit scores, is designed to turn a few more of those dreams into reality.
How it works
Credit scores rely on credit history, but don’t take into account other important factors of your financial profile – until now. With UltraFICO, borrowers have the option of sharing more information with lenders than ever before. Although credit scores typically consist of five specific elements, UltraFICO opens the door for a whole host of new data – including how you manage or balance your checkings, savings and money market accounts.
By permissioning the use of these data sources, borrowers can offer greater insight into their financial responsibility. Instead of assuming loan candidacy based solely on credit history, lenders can leverage this additional financial information to better inform credit decisioning.
Perhaps most importantly, we as consumers have unprecedented transparency into the data that is being used. Any confusion over what data is being used to recalculate a credit score will quickly become a thing of the past.
Who it helps
For consumers who have a subprime credit score – those in that “gray area” right on the cusp – more information means a better shot at obtaining a loan. Given the fact that just one in three millennials own a credit card to begin with, UltraFICO couldn’t come at a better time.
Millions of young adults are out of luck when it comes to borrowing. Among the most prominent reasons is fear of debt. Having seen their parents struggle to escape credit card debt, the last thing most millennials want to do is open a line of credit. Research shows millennials fear credit card debt more than the threat of war – or even death.
With UltraFICO, however, millennials will be better positioned for when they do need credit. Rather than using credit utilization or length of credit history to prove their financial wherewithal, consumers can point to other positive financial attributes – such as maintaining a healthy savings balance or paying a cell phone bill on time every month.
While millennials are prime candidates for UltraFICO, there’s no limit to who can take advantage of this new credit scoring system. For example, older adults who have paid off their mortgages may still want to obtain an auto loan. By giving them the option of sharing data from a well-funded checking or savings account, UltraFICO can help make up for any dips in credit score. It will also benefit other emerging consumers and borrowers who may have had previous negative marks but otherwise have demonstrated positive financial management.
Why it matters
We’ve entered a new era in credit scoring. Once left to wonder if they’d qualify for a loan, consumers are now empowered to provide more information that’s relevant to their credit worthiness. Whether it’s showing you have cash on hand for emergencies or that you’ve avoided a negative balance in your checking account, data that sits outside of the traditional credit scoring model can move consumers one step closer toward reaching their financial goals.
The best part? UltraFICO is just the start of digital innovation in the credit decisioning space. As more ground-breaking ideas emerge, consumers stand to gain greater control over and insight into their financial lives.