You probably already know your credit score is one of the chief determining factors when lenders evaluate your loan worthiness; this has traditionally been based solely upon your repayment history, the amount of your outstanding debt and the length of your credit history. New credit for which you’ve applied and the types of credit you have also figure into the calculations.
However, the credit reporting bureau Experian, in conjunction with FICO and the financial technology company Finicity have introduced an additional set of criteria to supplement these. It’s called the “UltraFICO Score,” and the key to understanding it is knowing it relies upon your banking information to provide a potential boost to your standard FICO score.
Why This Matters
FICO credit scores rank from 300 up to 850. Anything above 670 is considered good. Scores falling between 669 and 580 are considered fair, while 579 and lower is considered poor credit.
Let’s say you’re currently qualified for a car refinance loan with bad credit because your FICO score is 669. With a strong UltraFICO showing, you could bump that number by 20 points, thereby pushing your score to 689, which places you in the mainstream of borrowers.
As a result, you’ll qualify for a standard loan with a lower interest rate — as opposed to a subprime loan at a higher rate. This can also be of benefit if you have a thin credit history, or your score has taken a hit because a temporary hardship caused you to miss a payment or two.
How it Works
In addition to the standard criteria, the UltraFICO score evaluates the activity in your checking savings accounts. Granting access to this information allows lenders to see how you manage your money overall — as opposed to just how you manage debt.
Among the considerations are the length of time the accounts have been open and whether or not you’ve had overdrafts. Direct deposit also factors positively into the deliberations.
When You’ll Qualify
Participating lenders will offer you the option of an UltraFICO score if you’re right on the edge for an approval.
However, the loan originator with which you’re working must currently be an Experian client, as that bureau is the only one considering these additional parameters as of this writing. The program is slated for broader availability during the third quarter of 2019.
Keep in mind; requesting an UltraFICO score will require you to allow lenders to look deeper into your personal finances. You’ll have to provide account numbers and other information about the accounts you’d like evaluated. This means you’ll have to trust that data will be protected to avoid identity theft.
How You’ll Qualify
If you’re maintaining an average savings balance of $400 and are free of overdrafts for 90 days preceding the inquiry, you will usually get a credit score bump with UltraFICO.
To ensure your record reflects these qualifications, it’s important to have long-standing bank accounts with regular activity. Dormant accounts, as well as bouncing checks or committing overdrafts will be looked upon negatively. You’ll also want to have a strong history of saving.
These factors matter because lenders perceive them to be a strong indicator of your money management skills. Said simply, they demonstrate you’re using cash carefully and wisely. It’s estimated 70% of the people fitting this profile will see an improvement in their credit rating with UltraFICO.
If your ranking is right on the edge, understanding the UltraFICO score and managing your accounts accordingly could be the difference between getting a loan at a good interest rate or paying more because you’re considered a higher risk.
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