By Allan Halcrow | American Express Credit Intel Freelance Contributor
7 Min Read | August 4, 2021 in Credit Score
FICO is changing the way it generates your credit score by adding three major new credit scoring products to its portfolio: UltraFICO, FICO 10, and FICO 10 T. Each of these has a different purpose, and each has the potential to affect your score in positive – or negative – ways. None of them is being used widely yet; but you could see their use cause changes to your score soon, so understanding how and why the changes may occur can help you prepare for them.
In a nutshell, the three are:
Although the new FICO 10 Suite has the potential to affect all of us, UltraFICO will be relevant only to those who opt in. UltraFICO is a joint venture of FICO, the credit reporting agency Experian, and the consumer financial data firm Finicity. It’s designed specifically for two groups:
The intent is to give people a chance to boost their scores by showing lenders what FICO calls “indicators of sound financial behavior.” That translates to granting FICO access to your money market, checking, and savings accounts to show that you’re good at managing your cash flow. Exactly how that data intersects with the data typically used to calculate your credit score is unknown; FICO regards its formula as secret.
Those most likely to benefit from UltraFICO are people in the credit score “gray zone,” or middle ranges, with scores from the upper 500s to the lower 600s. For more on ranges, see “Credit Score Ranges: What is an Excellent, Good, or Poor Credit Score?” Ideally, the boost will be enough to help people who would otherwise be denied credit, or help people get a more favorable interest rate. To opt in for UltraFICO:
FICO says that as many as 70% of people who meet those criteria could see a boost to their scores.1 Exactly how much of a boost is unclear, but early results show that about 40% of “credit newbies” saw a lift of 20 points or more, while about 10% of people rebuilding credit saw a similar boost.2 If you’re in one of the target groups, those improvements may make UltraFICO sound worthwhile, but here are five things to be aware of:
Of the three new FICO products, FICO 10 will probably have the most impact because it could potentially affect everyone with a credit history – as many as 40 million people could see their scores drop by at least 20 points.3 If your score is on the line between good and fair, that may mean the difference between getting a loan or not, or getting a more favorable interest rate. On the other hand, another 40 million people with better credit histories could see their scores pushed at least 40 points higher.
These changes are the likely result of FICO’s strategy to integrate more data about the total amount of your debt – and the rate and frequency at which you pay it down – into your credit score. Specifically, with FICO 10:
Unlike the basic FICO 10, which recalibrates data already being considered in your credit score, FICO 10 T is designed to embrace trended data. Instead of providing a brief snapshot of your credit score at any given moment, trended data gives lenders insight into 24 months or more of your historical credit data. That data may include account balances, minimum payment requirements, and the amounts you actually paid each month. This trended data generated by FICO 10 T (sometimes called time-series data) gives lenders perspectives they didn’t previously have:
Despite new features of these products, keep in mind they are still FICO scores and remain primarily based on the same factors FICO credit scores have always used. So, in general, the ways to develop and maintain a good credit score have stayed the same:
If you do those things, you can increase your chances of reaping the benefits of the new FICO products.
FICO is introducing three new credit scoring products, all of which incorporate data that didn’t previously figure into FICO scores. FICO 10 and 10 T have the potential to benefit people who are actively paying down their debt, while UltraFICO assesses how you handle cash as a way to boost marginal credit scores. You can take steps now to maximize the benefits of these FICO changes.
2 “UltraFICOTM Score Could Boost Credit Access for Consumers,” Nerd Wallet
3 “FICO10: What to Expect and How to Make Your Credit Shine,” Nerd Wallet
4 “FICO Introduces New FICO Score 10 Suite,” FICO