For anyone who’s ever held their breath (and crossed their fingers for 700+) while they’ve done a soft pull on their credit report, we’ve got good news: The UltraFICO score is coming in 2019, and depending on your credit report, it could be the difference between a loan approval…or not.
Here’s a deeper dive into the new scoring system and how it could help (or hurt) your chances for getting a loan.
First, what is an UltraFICO score? Basically, it’s a new scoring system for judging your loan eligibility that looks at the balance activity of your checking, savings, even your Venmo transactions, in addition to your credit history. This means that if you were previously denied on a credit card application (for example), the UltraFICO score could give you the bump you need for the approval to go through. (Keep in mind that a FICO score ranks your credit on a scale of 300 to 850; the UltraFICO can boost your regular FICO score by about 20 points.)
Sounds interesting. What’s my score? Since UltraFICO doesn’t launch until 2019, the most you can do right now to generate your score is sign up to learn more about how to get it as soon as it launches. But as long as you show an average savings of $400 without a negative balance in three months time, the UltraFICO could boost your score by 20 points (or more).
Silly question: Why do we need UltraFICO? Say you never built a credit history—or have a black mark on your credit report that doesn’t reflect how you typically manage your cash. UltraFICO is a second chance scoring opportunity, so you don’t miss out on savings. Still, it’s still a lender’s game: They—a bank, your landlord—can pull it at their discretion as a way to supplement data already in your credit report if they feel you’re on the cusp of approval.
Who does it impact the most? If you already have an excellent credit score, the UltraFICO won’t apply to you, but if your score is on the lower side or high 600s where you’re just shy of getting approved for a loan—the UltraFICO could be the tipping point.
So, to enhance my score, I just need a monthly balance of $400? Other factors include maintaining a checking account long-term, having a healthy savings or even making good on all your Venmo or Paypal transactions.
Will it really make the difference in terms of mortgages? Sorta. Most likely, it will be offered to those who are just below the cut-off for approval. “The lender will still have the option to evaluate the person—and calibrate—so they’re not lending to riskier people,” says Priya Malani, founder of financial planning firm Stash Wealth.
The bottom line: The UltraFICO is ideal for the consumer who is financially solid but could use a boost when it comes to loan approval because they’re not following a traditional path to banking.