Since the UltraFICO score was created in 1989, the credit score has focused on consumer borrowing history with data provided by Equifax, Experian, and TransUnion—the three major credit bureaus.

For the first time, UltraFICO—FICO’s new credit score system—will use bank information in addition to traditional credit information. This change in data sources will help to boost some consumers’ credit scores. UltraFICO was rolled out in 2019.

The UltraFICO score is a partnership between Experian, FICO, and Finicity. It was announced during the Money 20/20 USA conference.

Experian is one of the three nationwide credit bureaus, and Finicity is a financial technology company that allows consumers to share data with financial service providers.

Finicity has an asset verification process that can provide accurate information about your bank account.

• What is UltraFICO Score?
• How does UltraFICO work?
• Who will the UltraFICO score help?
• What is a Good FICO Risk Score?
• What’s more Important Credit Score or FICO Score?
• How does Credit Scoring System Work?
• How Your Credit Score Impacts Some Financial Products
• What are the Components of a Credit Score?
• How can I Quickly Raise my Credit Score?

What is UltraFICO Score?

The UltraFICO score is an opt-in credit model that uses information from your checking, savings or money market accounts to supplement data already in your credit report.

Read Also: Payment History is The Biggest Part of Your Credit Score: Here’s How to Fix it

The information being considered includes how much you have in savings, how long the accounts have been open and how active they are. It’s meant to enhance your existing FICO score.

If you are already in the excellent credit range and don’t need additional points for approval or to qualify for the best terms, it won’t be offered to you. But this supplemental information could be especially helpful for consumers with scores in the upper 500s to lower 600s, considered bad to fair credit.

The only credit bureau currently testing UltraFICO is Experian.

With the UltraFICO™ Score, you can leverage your good banking behavior to enhance your FICO^® Score. If you have a low FICO^® Score or no score at all, then you have a chance to get an UltraFICO™ score based on the banking data you share.

The UltraFICO™ Score is based on activity from your checking, savings or money market accounts that shows your responsible financial management.

That information includes how much money you have in your account(s), how long you’ve had those accounts and how much you use them. And while this information doesn’t appear on your credit report, it can be used to help improve your FICO scores.

How does UltraFICO work?

Consumers have to opt in by signing up on FICO’s website and linking their bank accounts, allowing it to scan transactions.

The scoring algorithm checks whether the consumer consistently has cash on hand, how long accounts have been open, how active the account is and whether there’s been a negative balance.

Lenders using UltraFICO can offer it to consumers whose credit was not good enough to qualify. If you do not qualify, you can ask the lender to pull your UltraFICO score (assuming the lender offers that option). There is only one inquiry on your credit during the whole process.

Who will the UltraFICO score help?

The UltraFICO score is almost like a “second-chance score,” said David Shellenberger, senior director of scores and predictive analytics at FICO. It tends to benefit two groups of consumers:

• Those with “thin” files, or little credit history.
• People trying to rebuild credit.

Credit newbies are more likely to see a significant benefit, assuming they have not had a negative account balance in the past three months and maintain a decent savings balance. Shellenberger referred to a “moderate amount” of savings, meaning $400 or more.

FICO said that among consumers who had kept a positive balance in a deposit account and maintained an average of at least $400 in a savings account, 70% improved their scores with the addition of that information.

Shellenberger said 40% of credit newbies saw an increase of 20 points or more. Among those with previous financial distress — such as an account in collections — 1 in 10 saw an increase of 20 points or more, he said.

You’re likely to be offered the option of UltraFICO if:

• Your score is just a few points below a cutoff.
• The lender is using an Experian credit score.

What is a Good FICO Risk Score?

For a score with a range between 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent.

Most credit scores fall between 600 and 750. Higher scores represent better credit decisions and can make creditors more confident that you will repay your future debts as agreed.

Credit scores are used by lenders, including banks providing mortgage loans, credit card companies, and even car dealerships financing auto purchases, to make decisions about whether or not to offer your credit (such as a credit card or loan) and what the terms of the offer (such as the interest rate or down payment) will be.

There are many different types of credit scores. FICO^® Scores and scores by VantageScore are two of the most common types of credit scores, but industry-specific scores also exist.

One of the most well-known types of credit score are FICO^® Scores, created by the Fair Isaac Corporation. FICO^® Scores are used by many lenders, and often range from 300 to 850.

A FICO^® Score of 670 or above is considered a good credit score, while a score of 800 or above is considered exceptional.

What’s more Important Credit Score or FICO Score?

Not all credit scores are FICO Scores. For over 25 years, FICO Scores have been the industry standard for determining a person’s credit risk.

Today, more than 90% of top lenders use FICO Scores to make faster, fairer, and more accurate lending decisions. Other credit scores can be very different from FICO Scores—sometimes by as much as 100 points!

What’s in a name? When it comes to FICO Scores versus other credit scores, the answer is “quite a lot.”

FICO Scores are used by 90% of top lenders to make decisions about credit approvals, terms, and interest rates. Chances are when you apply for a mortgage, an auto loan, credit card, or a new line of credit, the bank or lender is looking at your FICO Score.

The reason? Lenders know what they are getting when they review a FICO Score. FICO Scores are trusted to be a fair and reliable measure of whether a person will pay back their loan on time.

By consistently using FICO Scores, lenders take on less risk, and you get faster and fairer access to the credit you need and can manage.

FICO Scores use unique algorithms to calculate your credit risk based on the information contained in your credit reports. While many other companies design their credit scores to look like a FICO Score, the mathematical formulas they use can vary greatly.

Unfortunately, the methods used by these other companies can lead to credit scores that are very different from your FICO Score. And even just a few points difference can have significant consequences on your terms and rates—potentially costing you hundreds or even thousands of dollars.

Why do FICO Scores matter?

Imagine a world where every lender used a completely different method to decide whether or not to give you a loan. You would have no way of knowing whether you would be approved at one place and denied at another.

This was actually the case not that long ago. There were all kinds of different ways that lenders would make decisions about extending credit (including data about a person’s address, type of employment, and gender, among other things.).

People were often approved or denied based on inconsistent and sometimes unfair information.

In 1989, FICO Scores were created as a way to help streamline the decision-making process for lenders and make the lending process more consistent and fairer for people like you

How does Credit Scoring System Work?

A credit score is a number that third parties, especially lenders, use to assess the risk of lending you money. The score is one way banks, credit card companies and other institutions assess the likelihood that you can or will be able to pay off any debts you accumulate.

A higher credit score indicates that your current financial circumstances and your historical behavior demonstrate a willingness and ability to pay off any loans you may be approved for.

In the United States the credit scoring system you will hear about most is the FICO score, a score used by the major credit agencies to rate your creditworthiness.

Your FICO score will be between 300 and 850 with a higher score being better. When it comes to your credit, lenders may sometimes refer to it in terms of Credit Level or Credit Quality such as Poor, Fair/Average, Good or Excellent with each category referring to a range of FICO scores.

• Poor credit is considered anyone with a FICO score under 580
• Fair or Fair credit rating will be between 580 and 669
• Good credit is between 670 and 739
• Very Good credit is between 740 and 799
• Excellent credit is anything above 800

How Your Credit Score Impacts Some Financial Products

Your credit score can have an effect in two ways: Whether you can get approved for a financial product in the first place, and what interest rates you may have to pay if you are approved.

The higher your FICO score the more likely you are to get approved for a credit card or loan, and will usually reduce the interest rate associated with that particular loan or card.

Lower scores may disqualify you for a product or service completely and can raise your interest rates significantly otherwise.

For many credit cards, especially the most lucrative rewards cards, the cards are offered only to consumers that meet a minimum credit quality. Many of the best cards are exclusively marketed to consumers with excellent credit scores.

When it comes to credit cards your credit score can determine the breadth of options you can choose from. Most cards are also marketed with a range of interest rates/APRs.

The actual interest rate on your specific card will be inversely related to your credit score with higher creditworthiness receiving lower interest rates and vice versa.

With mortgages and auto loans, lenders behave similarly. Your credit score is used as a component whether or not a bank will choose to approve a loan or may force you to make additional concessions for approval. It can and generally will move the interest rate you pay on the loan as well.

What are the Components of a Credit Score?

The makeup of your FICO score is broken up into a bunch of major factors: Payment History (35%), Debt Burden (30%), Length of History (15%), Types of Credit(10%), and Recent Credit Searches(10%). Let’s take a look at how these components fit in to creating your overall credit profile.

Payment History

Your payment history is by and large the largest single component of your FICO score. The best way to think of your payment history is to consider it a track record of all the things you’ve done wrong when it comes to credit and a measure of how you behave when it comes to your debts.

You don’t get a boost for paying things on time as much as you get penalized for not doing so. A history marked with negative information would indicate that the person often faces difficulty meeting their debt obligations, or rather someone that has a risky attitude when it comes to their credit.

Both are signals to the lender that they may want to be more cautious when it comes to making additional credit available.

Late Payments

The most common problem consumers face in the payment history component is late payments. Whether it was because you simply forgot or were struggling to make ends meet, being late on a monthly payment for your credit card or a loan will usually cause a negative adjustment on your credit score.

How much of an impact can also depend on how late you were with the FICO score making larger downward adjustments the later it is.

You will see this reflected on your credit report with late payments marked under categories like 30-days or 60-days etc. One thing to be aware of is missed or late payments on what may seem like trivial amounts can be just as damaging.

One major reason for keeping the number of credit cards and accounts you have at a manageable level is to avoid these issues. It’s way too easy to open up a store credit card, make a charge on it and simply forget about the account.

Even if you’re making thousands of responsible payments on all your other accounts, forgetting to pay off the $50 you spent on that one off charge can dramatically hurt your credit score.

Debt Burden or Accounts Owed

The other major component category of your credit score is the break up of your existing debt burden including how much you owe in total, what types of loans you have and any other quantitative indicators about your overall debt/credit profile.

As an indicator of your creditworthiness how much you owe and how it’s broken up across the different types of loans acts as a signal about your capacity to manage your existing debt.

When it comes to how this plays into your credit score, it’s probably not worthwhile to think of it was higher/lower = better.

In all likelihood, the FICO calculation doesn’t evaluate your debt burden in isolation but considers it in relation to things like your payment history. For instance, let’s consider a credit profile of someone who has large amounts of debt but a long and spotless payment history.

This might indicate that the person is financially well off and the debt burden is a signal that any additional loans might be obligations they can easily handle.

Take the same level of debt on a profile with a recent history of payment problems, and the higher quantitative factors should be a major red flag. This consumer may be having difficulties making ends meet and even a small amount of additional credit might be a risky proposition.

Credit Utilization

Credit Utilization or Debt to Limit ratio is often brought up when discussing the Debt Burden component. It is one of the pieces that make up this piece of your FICO score and is a measure of the total amount of debt on your credit card accounts against the total limit allowed on those accounts.

A lower credit utilization, meaning your average balance is lower relative to the total amount you could have on your cards is better for your score.

This ratio can come into play when you might otherwise consider canceling an existing credit card. Even if you don’t use that card, as long as it doesn’t have any fees associated with having it around, your credit utilization figures look better because of the larger total credit limit overall.

This also means that requesting a higher credit limit on existing credit cards can help your credit score since it will help lower the overall ratio.

The reason this measure is used as a factor is that it’s a helpful indicator of how much wiggle room you have when it comes to your finances.

If you’re only using a small portion of what the card companies have judged you to be capable of paying off, then small changes in your personal finances or incremental debt may not put you at much more risk.

Length of Credit History

Your score accounts for the length of time the various accounts under your name have been around, including the average amount across all the accounts as well as the length of your oldest open account.

The length of your history helps to indicate how representative the other factors of score are about your creditworthiness.

The older your accounts and your overall credit history, the larger time frame from which a company can accurately judge both your finances and behavior towards credit.

A few years of data about a consumers is a better indicator for how they may act in the future than having only a few months of information.

Considering Age of Account When Canceling Cards

The credit history length can come into play when considering how you should deal with something like an old credit card. In many cases the first credit card a consumer gets may no longer be the best option going forward.

This is often the case for someone that may have had no credit history to speak of when getting a card and have over time built a great credit history for themselves.

Types of Credit

The smallest component of your credit score, your FICO score takes into account the different types of debt or credit used.

Your accounts are classified into things like revolving credit (credit cards), mortgages, consumer finances or installment loans and a history of having a broader exposure may be a positive signal. Why should having a history with more credit types matter?

Having an existing history of exposure to different types of credit is a helpful indicator that a consumer is familiar with the different financial products and can manage them appropriately.

Consumers also may not have the same attitude towards paying off a credit card vs. their mortgage so a lender might want to be more cautious with someone with a narrower exposure history.

Much like the Length of history component, the types of credit component is likely used as a measure for how representative your existing credit history sample size will be about your future behavior.

A broadly representative history will in most cases be a better predictor of how a consumer will act in the large range of credit situations in the future.

Recent Credit Searches

The last component of the FICO score is an adjustment based on any recent searches or hard inquiries made into your credit profile. This tracks the number of times lenders have requested your data, with the potential for a consistent high number of request to drag your score down.

The FICO score calculation does make a number of adjustments in how it evaluates the number of inquiries however.

When it comes to mortgages, auto loans, and student loans it’s expected that most consumers will shop for rates at a large number of lenders so all searches of these types that occur within 14 to 45 days of one another are considered a single request.

These inquiries also take 30 days before they affect your score so that you will be evaluated fairly while rate shopping.

These adjustments mean that consumers seeking a loan are best served it they compress the time in which they rate shop, such that they have the least amount of impact on their score overall.

Lastly, consumers often under go credit score queries for reasons other than getting a loan. This may include checking your own credit score, or a requirement as part of employment.

In these cases, the queries are not considered a hard pull/inquiry and will not appear on the reports used by the lenders for evaluation.

How can I Quickly Raise my Credit Score?

Like it or not, your credit score dictates everything from whether you’re approved for a credit card to what interest rate you’re offered on a mortgage or other loan.

So, with the economy now teetering on the brink of recession as the coronavirus pandemic sweeps the nation, you would be wise to get your credit score in tip-top shape as soon as possible. Your financial security might soon depend upon the strength of your score.

Here are some of the fastest ways to increase your credit score:

1. Clean up your credit report

Before you do anything else, go to AnnualCreditReport.com and request a credit report from each of the three big nationwide credit reporting companies:

• Equifax
• Experian
• TransUnion

By law, you’re entitled to one free report every 12 months. When you request it, be ready to print it or save it to your computer.

Once you have the report, examine everything. In particular, look for any accounts that show late payments or unpaid bills. If that information is inaccurate, the report should tell you where to send a dispute.

Keeping a clean credit report isn’t only important for your credit score. It can also affect your job prospects. Some employers pull credit reports before making hiring decisions.

You may also want to sign up for a free account with Credit Sesame, which will give you an idea of how your reports are shaping your credit scores. You’ll also get to see your VantageScore from TransUnion, one of the three big credit reporting companies.

2. Pay down your balance

According to Fair Isaac Corp., aka FICO, the company that calculates one of the most widely used credit scores, 30% of your FICO score is based on the amount you owe.

However, it’s not simply how much you owe that’s important. It’s how much you owe compared with how much credit you have, a ratio known as your credit utilization rate.

For example, if you have a $10,000 credit limit and a $5,000 balance, your credit utilization is 50%. If you’ve maxed out that $10,000 limit, your utilization is 100%.

There are many theories on the ideal credit utilization rate, but Experian suggests it’s best to have a rate of less than 30%. In other words, you should never have more than $3,000 charged at any time if you have a $10,000 limit.

If your credit utilization rate is high, paying down your balances is a quick way to lower that rate and thus boost your score.

3. Pay twice a month

You might think you’re doing great because you pay off your card every month, even if it’s maxed out. The problem is that your creditors are only reporting balances to the credit reporting companies once a month.

If you run up a big balance each month, it could look like you’re overusing your credit.

For example, assume you have a credit card with a $1,000 limit. It’s a rewards card, so you use it for everything. In fact, every month, you hit your limit. The statement arrives, you owe $1,000, and you pay it off.

But depending on what point in the month the credit card company reports your statement balance, it might look like you have a $1,000 limit and a $1,000 balance every month. That’s a 100% credit utilization rate.

You can help alleviate the problem by breaking up your credit card payments. Go ahead and charge everything to get the rewards, but send in payments at least twice a month to keep your running balance lower.

In addition, if you make a large purchase on your card and have the cash handy, pay it off immediately.

4. Increase your credit limit

Maybe you’re not in a position to pay down your balances. You could take a different approach to improving your credit utilization rate: Call your creditor and ask for a credit limit increase.

If you’ve maxed out your $1,000 card and get a limit increase to $2,000, you’ve instantly cut your credit utilization rate in half. The key is to not spend any of your new credit. It defeats the purpose of getting a limit increase if you immediately charge the card up to $2,000.

5. Open a new account

If your current credit card issuer balks at the idea of increasing your credit limit, apply for a card from a different issuer. It will still help your credit utilization rate, since your utilization rate is based on all your open lines of credit and balances.

So, an individual with $10,000 in credit who owes $5,000 will have a 50% credit utilization rate regardless of whether that $5,000 is on one card or spread across multiple cards.

Be aware, though, that opening multiple accounts at once is not good either. Having too many new accounts can make you look like you desperately want to go on a spending spree.

Don’t risk dinging your credit score by applying for more than one new card if you’re going to try this strategy.

6. Negotiate outstanding balances

Maybe your credit score took a dive because you have bills in debt collections. You can’t wipe out past mistakes from your credit report, but you can do some damage control by settling them.

Read Also: How to Get Into Real Estate With no Money And Bad Credit

Dummies.com has a short, easy-to-understand primer on how to negotiate your debt. The most important step is to get an agreement in writing.

7. Become an authorized user

Finally, if none of the above suggestions helps you, don’t despair. There is one final option, and that is to be added as an authorized user on someone else’s credit card account.

Now, for this to work, you’ll need to find someone who loves you very much and who manages his or her money very well.

Once you find this very special person who is going to do you a huge favor, explain you have no intention of using the credit card. You just want to be added to their account as a way to build credit.

You see, when you’re an authorized user, the account will show up on your credit report.

Then, your credit report will reflect the primary cardholder’s on-time payments and (hopefully great) credit utilization rate. As a result, your credit score gets a boost, too.

While these strategies can raise your credit score fast, keep in mind that “fast” is a relative term. You won’t see results overnight; give it three months or so for the changes to begin affecting your score positively.