For many people, maintaining a good credit rating matters, especially as it can affect their loan and credit applications. If you are in need of help improving your ratings, you will be happy to know that Fair Issac and Company, the institution responsible for credit-scoring, is issuing an all-new rating system.
How it Affects Borrowers and Lenders
According to FICO, this new system called UltraFICO makes use of shared data to make assessments and assign scores. With this, individuals can link their financial accounts such as their savings, credit and checking with the company’s secure connections. This allows the company to detect responsible financial behaviours and increase the individual’s score. In their findings, 70% of clients that have an average balance of $400 in the most recent three-month period can experience a boost in their scores.
Other factors FICO considers include payments such as phone, water and electricity bills, as well as the individual’s performance in previous and existing lines.
Aside from people with bad or average ratings, those with no score at all can have access to UltraFICO. Forbes emphasises that this is one of the deciding factors in lenders approving loan applications. This results in more borrowers having access to lending services such as personal, business and student loans. Because more individuals qualify for loans and other credit offers, it is possible that lenders will grant more applications.
Aside from loans, this new rating system makes it easier for individuals to apply for credit cards.
A Word of Warning
With more options becoming more accessible, consumers may open more credit lines. Wharton and University of Utah experts express concern on accounts management, especially as there could be “inscrutable offers of credit.” They also warn customers to take measures in protecting financial data.
UltraFICO is slated for release in early 2019 and is expected to help in aiding build proof of savings and healthy balance, bank account responsibility, lack of negative balance and regular bills payments.