There’s a new and free tool available for consumers who are looking to boost their credit scores. UltraFICO was rolled out in late 2019 as a method of rewarding good financial habits that are unrecognized by current credit scoring models, and it could help millions of Americans.
UltraFICO can help anyone, but will be most beneficial for young people, immigrants with limited credit histories, or those with credit scores that fall in the grey area from the upper 500s to the lower 600s (or just below a lender’s cutoff).
Currently, credit scores are primarily determined by your track record of paying off debts, and your debt-to-income ratio. With UltraFICO, a consumer grants permission to contribute information from banking statements, including the length of time accounts have been open, frequency of activity, and evidence of saving. If you manage your money well, the combination of the existing factors and new UltraFICO categories could provide a nice bump to your credit score.
“This changes the whole dynamic of the lender and customer relationship,” Jim Wehmann, executive vice president, Scores, at FICO said in a release. “It empowers consumers to have greater control over the information that is being used in making credit risk decisions. It also enables a deeper dialogue between the consumer and lenders to help both parties make better financial decisions. It’s a game changer.”
This fingerprint of your financial DNA impacts many areas of your life: the interest rates on your credit cards and loans, your ability to borrow money, and even future employment, as many HR departments will do a credit check to help learn more about your character during the interview process.
While many applaud this new opportunity to increase credit scores, some have cited two concerns. One is that consumers will be revealing more personal information to financial firms, which is concerning given the multiple hacks that have occurred over the last few years. The other is that higher credit scores will possibly encourage more borrowing by consumers, promoting the behavior that led to lower scores to begin with.
UltraFICO is free for consumers, but you must opt-in. For more information or to sign-up, visit www.fico.com/ultrafico.