UltraFICO™ Score Pilot Program Extends Financial Inclusion
You’ve been there before as an entrepreneur (or you’re fortunate if you haven’t): You are trying to take out a line of credit and those three numbers that are unique to just you—your FICO® Score—tell the lender you are more likely to default on payment and you are denied. But what if you could give permission for the lender to access additional information that demonstrates positive financial behavior to turn that “no” into a “maybe” or a “yes,” or even help you qualify for better terms?
Experian®, FICO and Finicity® are piloting an innovative new credit product called UltraFICO™ Score that can extend financial inclusion and help you score the credit you need to grow. UltraFICO Score leverages account aggregation technology and distribution capability from Experian and Finicity to help consumers improve their access to credit by tapping into consumer-contributed data, such as checking, savings and money market account data, that reflects responsible financial management activity.
UltraFICO™ Score—once it’s validated through a select group of vendors and then officially launched at the end of the year—could prove particularly beneficial for small business owners, especially those in two key addressable markets:
• 53 million people in the U.S. who are credit invisible or have sparse data on record and currently don’t receive a traditional FICO® Score.
• 79 million U.S. consumers with FICO Scores below 680 who could potentially improve their score if they are willing to share additional financial data.
“Close to 70 percent of small business owners are individual entrepreneurs who need to leverage their personal score versus their business score to get access to credit,” says Joanne Gaskin, vice president of Scores and Analytics at FICO, who has spent the past 11 years working for the analytics company after an earlier career in banking. “We started having conversations at the Small Business Roundtable and they’re pretty excited about how UltraFICO™ can help credit scores to be more inclusive to more consumers.”
When UltraFICO™ rolls out more broadly, it will mark the first time people have been able to grant permission to access additional financial information, including DDA accounts, the length of time these accounts have been open, recency and frequency of transactions and evidence of saving and keeping healthy account balances, through point-of-sale application program interfaces (APIs). These APIs allow Ficinity to safely and securely aggregate the permissioned data to be used by the scoring algorithm.
“Generally, what we’re seeing during this initial rollout is that it’s being used as a second chance score,” shares Joanne. “Let’s say an entrepreneur goes to XYZ lender and applies for a line of credit and for whatever reason, the minimum criteria is not met. At that point, the lender would come back and present the consumer with the option of participating in UltraFICO™, and if they’re willing to share this information, they may be able to get qualified.”
Once the lender has permission, consumers will be asked to go into the system and pick the accounts they want to share. This new information is then electronically read by Finicity and combined with consumer credit information from Experian to provide an enhanced view of positive financial behavior—and ultimately an UltraFICO™ score that could potentially turn a “no” into a “maybe” or even a “yes.”
This is exciting news for Joanne and her colleagues. “At FICO, we’re very passionate about our commitment to financial inclusion and making sure we have the most innovative tools to help people access the credit they need. We believe that access to credit leads to being able to build wealth.” And that’s especially important for driven women and small business owners looking for the resources they need to grow to the next level.
4 Facts About UltraFICO
1) Seven out of 10 consumers in the U.S. who exhibit sound financial behavior in their checking and savings accounts see an UltraFICO Score that is higher than their traditional FICO Score.
2) Of all consumers who keep positive balances on their accounts in past three months, 70 percent of the population experiences a score increase with UltraFICO™.
3) Of consumers with thin/young credit files, 78 percent experiences a score increase; with more than 40 percent seeing an increase of more than 20 points.
4) Of consumers with non-prime credit files, 77 percent experience a score increase. More than one in 10 see an increase of 20 points or more.
4 Tips from Joanne for Increasing Your Score in the Meantime
1) Only apply for credit when you really need it.
2) Make certain you are keeping current on all your payments.
3) Be sure to watch your utilization rates and keep those as low as possible.
4) Continue to watch for news coming from FICO about the full release and lenders who are participating.
Learn about UltraFICO™ and watch for new announcements here.