New UltraFICO Credit Score Aims to Help More People Get LoansFair Isaac Corporation, the company behind the FICO model for scoring consumer credit, recently announced a new alternative scoring method dubbed UltraFICO. The goal of UltraFICO is to give people with spotty or shallow credit histories easier access to credit, boosting the number of people who are eligible for loans. However, it may not be as useful as it sounds on paper, and though it’s free to sign up, it does cost a bit of your privacy. To get the details on UltraFICO scores and see if UltraFICO is something you should keep an eye on for the future, keep reading.

What are UltraFICO credit scores?

UltraFICO credit scores factor in checking and savings account activity, including current bank balances, length of banking history, overdraw history and transaction frequency, in addition to traditional credit scoring metrics, such as your bill payment history and credit utilization ratio. Unlike many other credit scores, which are based on information that your creditors deliver to the credit bureaus without explicitly informing you, UltraFICO is optional. By signing up for UltraFICO, you agree to share your banking details with Experian, the credit bureau implementing UltraFICO, which will generate scores using that information. Once that’s done, if you apply for credit and your initial credit scores aren’t high enough, the lender can offer to recalculate your scores using UltraFICO to give you another chance. While UltraFICO will likely produce higher scores for a fair number of people, don’t expect it to be revolutionary. Fair Isaac estimates that, of the 26 million borrowers in the U.S. with subprime credit scores, about four million will experience score improvements of at least 20 points when using UltraFICO credit scores.

Currently, Fair Isaac plans to conduct a pilot program with UltraFICO in early 2019, giving it to a small number of financial institutions to test how well it works. Once the pilot phase is done, it will receive a wider release, and financial institutions will be able to choose whether or not to adopt it.

Should you use UltraFICO when it releases?

UltraFICO credit scores could help Americans gain better access to credit, but it will not benefit everyone equally. If you already have credit scores above 700 and several years of history on your credit reports, UltraFICO will probably not do much to help you. The new scoring model will likely do the most good for consumers with traditional FICO scores that are slightly too low to qualify them for loans, and who also have a good banking history. According to Fair Isaac, UltraFICO users need to have not overdrawn in the past three months and maintained an average balance of at least $400 between their checking and savings accounts in order to see credit score improvements from UltraFICO.

Even if you do fall into that group, it wouldn’t hurt to wait and see how wide UltraFICO spreads before signing up. Financial institutions will probably not adopt UltraFICO right when it comes out, even if the pilot program is successful. In 2014, Fair Isaac actually came out with another credit scoring model that was designed to improve credit scores and access to credit called FICO 9, and several years later it still isn’t as popular as Fair Isaac’s most widely-used scoring model, FICO 8. Since UltraFICO is being billed as an optional alternative to the mainline FICO scores, that may drive more lenders to adopt it, but only time will tell for sure.

There’s also a privacy concern when opting into UltraFICO, due to the information you have to share with Experian to make UltraFICO credit scores work. In the wake of the 2017 Equifax breach, we know that credit bureaus collect and store a large amount of information related to us, and that information isn’t 100% secure. Using UltraFICO means giving one credit bureau even more personal information, such as your bank balances and transaction history. If you think that your creditworthiness would benefit a lot from UltraFICO, maybe sacrificing a bit of your privacy is worth that to you, but if your credit scores are already good or you aren’t actively seeking out a loan with a lender that uses UltraFICO, there’s no reason to expose your banking details by signing up.

UltraFICO has the potential to provide a more accessible alternative to traditional credit scores, but it has some hurdles to clear before it’s worth embracing. To find more dos and don’ts for improving your credit scores, follow our credit monitoring blog.