FICO’s New Credit Score takes Banking Activity into Account Boosting Consumers’ Scores
Fair Isaac Corp. the company that invented credit scores, announced a new credit scoring system based partly on consumers’ bank account activity. Heretofore, credit scores ignored consumers’ bank activity. The new score called UltraFICO Score is not meant to weed out persons applying for credit. Rather, it is meant to improve credit scores for those who maintain a bank balance and who avoid overdrafts. FICO is doing so on the theory that such persons are more likely to repay their loans.
Of U.S. consumers with FICO credit scores, 58.2% have a score of 700 or higher on a scale that tops out at 850. The average FICO score is at a record 704. Experian considers scores under 670 subprime.
Experian will compile consumers’ banking information with help from financial-technology firm Finicity and will distribute the new score to lenders. The credit-reporting firm also will send lenders a report that includes a summary of the consumer’s bank accounts.