Experian, FICO, and Finicity are developing an “UltraFICO” score to improve access to financial products for borrowers with low credit score or short credit histories. This will be achieved by letting the borrowers share checkings and savings account data to help lenders better assess risk.

Why an “UltraFICO” Score?

After all, what is wrong with a FICO score (without the ultra)!!

“This changes the whole dynamic of the lender and customer relationship,” said Jim Wehmann, executive vice president, Scores, at FICO.  “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.”

The reason Jim is calling it a “game changer” is because Experian, FICO, and Finicity estimate this new score has the potential to improve credit access for the majority of Americans and is particularly relevant for those who fall in the grey area in terms of credit scores (scores in the upper 500s to lower 600s).

Over 15 million who currently do not have a FICO score could receive an UltraFICO score.

How will it exactly work?

The new score will show lenders responsible financial behavior using indicators not shown on a traditional credit report, like:

  • Evidence of Savings and Keeping a healthy average balance
  • Maintaining a bank account over time
  • Avoiding having a negative balance
  • Regularly paying bills that may not be reported on a credit report and making other bank transactions

How does UltraFICO work

When does it launch?

The UltraFICO™ Score will launch as a pilot program in early 2019. The pilot is designed to validate the score and assess the willingness of consumers to share financial data for a potentially higher score.

The model developed by FICO will be implemented through Experian and integrated into a lender’s existing operational workflow. The UltraFICO™ Score is slated to be broadly available to lenders mid-2019.

What’s the Downside?

So, we all know how good credit bureaus are at protecting our information (cough, cough). Equifax’s data breach of 2017 exposed personal sensitive information of 143 million consumers.

With so little faith in their ability to keep our information secure, do we want to trust them with even more sensitive information like our bank and transaction details?

Also, there is a question mark on the quality of loans. By opening credit to hitherto untested borrowers, are we risking the default rates to rise? We all know what happened in 2007-08 when the risky mortgages to unqualified borrowers imploded.