The New FICO Model: What Is It & How You Can Benefit
Posted By Noah Staum on January 29th, 2019
Managing a healthy credit score is always a key component to maintaining strong personal finance. But what goes into that?
In 2019, the elements that go into your credit score may change with the introduction of a new FICO model called UltraFICO. UltraFICO offers lenders a deeper look into your financial health.
Ultimately, UltraFICO is a supplement to the mainstream credit system. Its initial release will be a sort of pilot program that’s offered through a small group of lenders and to certain consumers with specific financial profiles who may benefit from the score.
In other words, it’s not going to immediately shake-up the credit system. UltraFICO is basically a “we need more information” type of credit check. It takes into consideration deposit accounts that you have and potentially some capital transactions you have made through services like PayPal and Venmo.
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The theory is that people with poor credit history but a strong amount of capital in deposit accounts (like checking and savings accounts) should be considered to have higher creditworthiness than just the standard credit score reveals.
The idea behind the score is to make securing credit more accessible to people without a credit history or who went through a personal financial crisis and are rebuilding their credit.
How Is It Different?
The key difference and this is big, in how UltraFICO is calculated as compared to current models is that it focuses on liquid capital assets you have in bank accounts.
Traditionally, you build your credit history based on how you handle debts that you take out over time. So, your creditworthiness is based on debt. This new model aims to not just consider your debts, but your current positive assets as well. If you have a savings account with $500 in it, for example, then that could potentially increase your credit score when adding in the UltraFICO calculation.
Who Will It Benefit?
If you have excellent credit then you will probably never see the UltraFICO come up when you go to take out a loan or open a credit card.
The UltraFICO score is really designed to provide more opportunities for people with very little or no credit history and to people who have a poor credit history and are in the process of rebuilding their score.
Those who are building credit for the first time will see the most benefit if they have $400 or more in a savings account. Under those conditions, when the UltraFICO is considered in their credit score, it rose significantly.
How Do I Get My UltraFICO Score?
Unfortunately, this remains to be seen. The UltraFICO score will be in its pilot stage during the beginning months of 2019. According to FICO, the score will primarily be available through more non-traditional lenders, like ones based online. Whoever opts into the pilot program will likely be a mid-tier lender, so keep your eyes open if you’re looking to secure a loan and want to take advantage of the potential eligibility increase you may see under this new scoring system.