Want to boost your credit score? It'll cost you some data
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A new system for scoring credit is rolling out in 2019. It could help people improve their creditworthiness — in exchange for access to their financial data. The new UltraFICO Score uses checking, savings and money market account data to flesh out a consumer's financial profile.
People must grant access to their bank statements to use UltraFICO. The score will factor the length of time accounts have been open, how frequently they're active and balances. UltraFICO combines this information with existing credit data.
FICO, Experian and Finicity, creators of the score, estimate it will improve access to credit for most Americans, particularly those who are new to credit or recovering from bad credit with scores in the upper 500s to lower 600s.
"Many lenders see this type of score as providing a second chance to consumers that have been denied credit," said Dave Shellenberger, vice president of scores and predictive analysis for FICO. "In that regard, if a consumer has a positive checking and savings history, they now have an opportunity to opt in and share it with the lender."
FICO expects that among consumers with no negative balances and a $400 average balance in their checking or savings accounts over the past three months, about 75% will see increased scores. Among those consumers, 40% will see an increase of 20 points or more in their UltraFICO score. Most lenders will be able to use UltraFICO by mid-2019.
A lender can invite a consumer applying for credit to use UltraFICO, likely because the consumer couldn't get a score under the traditional FICO model. The consumer is directed to a secure website to answer questions about their banking relationships, including providing their account credentials. Experian takes all this data and, presto chango, your credit score is updated accordingly.
Your credit score is a one-number summary of your borrowing history. Lenders use credit scores to decide how likely you are to pay them back on time. Your credit score can determine whether you get a loan for a home or a car, and how much interest you'll pay. It can also impact insurance premiums.
It takes into account your payment history for loans and credit cards; your credit utilization rate (how much credit you use compared to how much credit you have available); the type, number and age of your credit accounts; your total debt; how many credit accounts you've opened recently; and how many inquiries your credit report gets, among other things.
The fastest way to improve your credit score is by lowering credit card debt. You should also review your credit reports to ensure there are no errors or signs of identity theft that could drag your score down. Your credit reports are available for review every year on AnnualCreditReport.com.
Once you start paying down your debt, you can keep track of your progress by checking websites like Credit Karma or Credit Sesame. These sites let you check your score for free every month, though it should be noted that they're calculated under separate models from FICO, so might not be 100% accurate.
If you are't sure where to start, check out this guide to fixing your credit.
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