FICO credit score to add bank account information
by Advisor Websites on Jan 23, 2019
SF Chronicle Business Report Section D Pg. 1 & 3 by Kathleen Pender
Next year, lenders will have access to a new FICO credit score that will – for the first time and with the consumers’ permission – include information from a person’s checking or savings account, such as income and outgo, balances and over draft behavior, FICO of San Jose announced Monday. FICO’s traditional, widely used credit scores rely only on information about a person’s credit usage and payment history drawn from the person’s report at one of the three big credit bureaus. It does sell other scores, such as FICO XD, which use so-called alternative data, such as payment history from cable and utility data bases, but this is done without the consumer’s permission.
The new Ultra score is designed to help people who otherwise would be denied credit because their traditional score is too low or they have no credit history. FICO is positioning it as a “second chance” for borrowers after lenders have looked at their traditional FICO score. However, some lenders may look at it before looking at a potential borrower’s traditional score. In that case, it could end up hurting borrowers who otherwise might have gotten credit, or better credit terms.
FICO emphasized that consumers don’t have to allow access to their bank account information. “We are being very explicit about the fact that to help you, you need to maintain an average balance of about $400. a month” and not run negative balances, said Sally Taylor-Shoff, a scores vice president with FICO. UltraFICO will be available only when lenders pull a report from Experian, the credit bureau that’s partnering with FICO and Finicity, based near Salt Lake City, is a data aggregator that will pull information from a person’s bank account, summarize it and send it to Experian. Finicity will not include information about where consumers are writing checks or using their debit cards, at least for now.
Short term, Rosssman said UltraFICO “is probably good” for consumers because it will give more of them access to credit. But that’s happening at a time when the economy is booming and delinquencies rates are low. “Some people might get into these loans under the best-case scenario and not be able to pay them back when downturns or recessions occur,” he said. Schulz said, “There has been a lot of effort made over the last few years to try and get scores for people who have little or no credit. This seems like a big step in that direction. It’s about expanding the universe of borrowers that banks can lend to. Invariably in that group will be some folks who maybe don’t need credit or shouldn’t get credit. But this is really, primarily, a move to help banks expand the pond they are fishing in for customers.