Millennials feel that they are held back … by their credit score it is. Buzz60s Sam Berman has the whole story.
You can soon get higher credit score if you balance your checklist in a proper manner.
FICO, the developer of the most used credit score, rolls out a new score next year considering how to manage your control, savings and money market accounts as well as how to repay credit cards and loans.
This additional information may help increase the credit score of any of the 79 million Americans who have bad credit ories, along with the 53 million who have no credit points at all under the traditional FICO model. This can help them qualify for a credit card or loan.
"We've been focused on economic inclusion and what we've done can potentially improve access to credit for most Americans participating in it," says Sally Taylor-Shoff, Vice President of FICO. "Recent consumers along with those who have had earlier financial distress, these groups would most benefit from the new UltraFICO result. "
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How does it work?
If your credit score is not high enough to qualify for a loan or credit card or sitting because of a better interest rate, a lender can offer to use your banking activity to generate an UltraFICO score. You can also choose which accounts – control, savings or money market – will be considered in the recalculation. The point uses the same 300 to 850 area as other FICO points.
"It's like combining peanut butter and chocolate," said John Ulzheimer, a credit expert who previously worked at FICO and Equifax. "(This is) two useful sources of data, combined to a score."
Experian, one of the three major credit agencies, collects your bank account information using Finicity, a financial technology company, and sends the new score plus a summary of your bank accounts to the lender for a second evaluation. Experian will maintain bank account data to resolve any accuracy conflicts.
It's possible that your credit score may be reduced after the new bank information is added, according to Taylor-Shoff, so it's important to understand when your bank account can help you.
What is a good bank account?
The biggest factors are the average account balance and the list of transferred accounts. Those who maintain an average $ 400 balance and show no negative balances in the previous three months will most benefit from UltraFICO Score, says Taylor-Shoff. Other positive factors FICO considers:
- Has more deposits than outputs.
- Having an account open and active for some time.
- Regularly pay bills as tools and rent from these accounts.
Seven out of 10 people who demonstrate responsible control and savings account behavior can improve their points under the UltraFICO scoring system, the company says, something as much as 20 points. It can be translated into a lower interest rate or the difference between an approval and a denial.
The new score will begin its pilot program at the beginning of next year. FICO plans to offer the results to all lenders by that summer. The Pentagon Federal Credit Union, the third largest mortgage association in the United States of assets, participates in the pilot program.
Taylor-Shoff said that many lenders are interested in the new score. But it remains to be seen how quickly lenders will adopt this additional scoring system. For example, FICO's last credit score – FICO 9 – was released four years ago, but the previous version of the score – FICO 8 – is still the most widely used.
"You can build the best museum field in the world, but if nobody buys it, it does not matter," said Ulzheimer. "In some ways, FICO can be a victim of their own success."
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