Your UltraFICO score is what determines your creditworthiness. It’s a three-digit number, initially created by Fair Isaac Corporation in the 80s that evaluates many different factors from your credit report. Those factors are summarized by this number, which gives creditors a quick look at your likelihood of paying back your debts.

For example, when you go to apply for a mortgage, the lender will pull your credit report. They’ll review your credit report in detail, but they’ll also look at your credit score (FICO score) to quickly determine the rate and terms they’ll offer you. We covered a lot of points on UltraFICO in our previous article found here.

Let us now look at more ways the UltraFICO can benefit you and your credit score.

• What are the UltraFICO Score Primary Factors
• Who does UltraFICO help?
• What are the Benefits of Having a high FICO Score?
• Is a FICO Score of 8 Good?
• What is Experian Boost?
• Can Experian Boost Hurt your Score?

What are the UltraFICO Score Primary Factors

Your FICO score is composed of five primary factors, each with different weights:

Your payment history

This accounts for 35 percent of your overall FICO score and is determined by how often you pay your debt on time. If you’ve missed several mortgage payments, for instance, it’ll be accounted for here.

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

The amounts you owe

This accounts for 30 percent of your overall score, and it pulls in the total amount of debt you have in your name. This will include things like credit cards, car loans, mortgages, and any other debt showing on your credit report.

The length of your credit history

This accounts for 15 percent of your FICO score and is determined by taking the average period of your credit history. For example, if you only have one credit account that you opened three years ago, the average length of credit history would be three years.

If you have one account you opened three years ago and one you opened seven years ago, the average would be five years (7 + 3 = 10; 10/2 = 5). That’s a crude example but is essentially how your length of history is determined, only it factors in all the accounts on your credit report.

Your credit mix

This is a small factor, accounting for 10 percent of your overall FICO score and is evaluated by the variety of credit you have in your file. For example, if you have only credit cards, it would be hard to determine the likelihood of you paying back a mortgage loan. Creditors like to see a nice mix of credit on your file, so this is included in your score.

New credit you’ve applied for

This accounts for the final 10 percent of your FICO score and is pulled from the amount of new credit you’re applying for. Each time you apply for something like a credit card or a car loan, it’s considered a hard pull on your credit and will impact your credit score. The less often you apply for new credit, the better.

Who does UltraFICO help?

The idea behind the UltraFICO Score is to look at a borrower’s overall financial management. So if you’re fiscally responsible, this score can prove that fact to lenders.

This means that if you apply for financial products at participating institutions — banks that use UltraFICO Score — and have no credit score or a low credit score, you may get access to credit you otherwise wouldn’t.

It’ll also be easy to know if the bank is using the score because you have to agree to contribute your bank account information to calculate the score.

Exactly how much the score can help, however, is unclear because the model is new. No one knows for certain how credit models perform until there’s another negative macro-financial event like a recession that impacts our economy.

Ultimately, FICO benefits most from the new score because it sells the scoring technology without dealing with any of the credit risk. Some forward-thinking financial institutions may also benefit for extending more credit and taking back some market share. But again, that could change during the next recession.

UltraFICO may not affect most consumers directly

Just because you got declined for credit doesn’t mean that this announcement is going to make you creditworthy. The score will likely be used by a fraction of lenders, so it’s going to be years or even decades before we see any massive change to consumer credit.

Many lenders are still using FICO versions 3 and 4, which are decades old (FICO is up to version 9, released in 2016). This is because these old models work and banks don’t want to lose money because they’re beta-testing the latest credit model. As a result, many lenders likely won’t use the UltraFICO Score.

That said, there are some lenders who will be willing to try it out. Pentagon Federal Credit Union is already on board for the pilot program, according to a report by the Wall Street Journal.

However, the proverbial genie is out of the box. Your bank account is a great source of data that should be used to evaluate your creditworthiness.

Now that the biggest player in the credit industry is using alternative credit information, we’ll likely start seeing many non-bank lenders using this and similar models because they don’t have the same safety and soundness requirements of regulated institutions.

So while you may never see your UltraFICO Score, it may start getting easier to get approved for credit without a stellar credit history.

What are the Benefits of Having a high FICO Score?

You can survive with bad credit, but it’s not always easy and definitely not cheap. Establishing a good credit score will help you save money and make your financial life much easier. If you’re looking for reasons to maintain your good credit, here are some great benefits to having a good credit score.

1. Low Interest Rates on Credit Cards and Loans

The interest rate is one of the costs you pay for borrowing money and, often, the interest rate you get is directly tied to your credit score. If you have a good credit score, you’ll almost always qualify for the best interest rates, and you’ll pay lower finance charges on credit card balances and loans. The less money you pay in interest, the faster you’ll pay off the debt and the more money you have for other expenses. 

2. Better Chance for Credit Card and Loan Approval

Borrowers with a poor credit history typically avoid applying for a new credit card or loan because they’ve been turned down previously. Having an excellent credit score doesn’t guarantee approval, because lenders still consider other factors such as your income and debt.

However, a good credit score increases your chances of being approved for new credit. In other words, you can apply for a loan or credit card with confidence.

3. More Negotiating Power

A good credit score gives you leverage to negotiate a lower interest rate on a credit card or a new loan. If you need more bargaining power, you can take advantage of other attractive offers that you’ve received from other companies based on your credit score.

However, if you have a low credit score, creditors are unlikely to budge on loan terms, and you won’t have other credit offers or options. 

4. Get Approved for Higher Limits

Your borrowing capacity is based on your income and your credit score. One of the benefits of having a good credit score is that banks are willing to let you borrow more money because you’ve demonstrated that you pay back what you borrow on time. You may still get approved for some loans with a bad credit score, but the amount will be more limited.

5. Easier Approval for Rental Houses and Apartments

More landlords are using credit scores as part of their tenant screening process. A bad credit score, especially if it’s caused by a previous eviction or outstanding rental balance, can severely damage your chances of getting into an apartment. A good credit score saves you the time and hassle of finding a landlord that will approve renters with damaged credit. 

6. Better Car Insurance Rates

Add auto insurers to the list of companies that will use a bad credit score against you. Insurance companies use information from your credit report and insurance history to develop your insurance risk score, so they often penalize people who have low credit scores with higher insurance premiums.

With a good credit score, you’ll typically pay less for insurance than similar applicants with lower credit scores.

7. Get a Cell Phone on Contract With No Security Deposit

Another drawback of having a bad credit score is that cell phone service providers may not give you a contract. Instead, you’ll have to choose one of those pay-as-you-go plans that have more expensive phones.

At the least, you might have to pay extra on your contract until you’ve established yourself with the provider. People with good credit avoid paying a security deposit and may receive a discounted purchase price on the latest phones by signing a contract.

8. Avoid Security Deposits on Utilities

These deposits are sometimes $100 to $200 and a huge inconvenience when you’re relocating. You may not be planning to move soon, but a natural disaster or an unforeseen circumstance could change your plans. A good credit score means you won’t have to pay a security deposit when you establish utility service in your name or transfer service to another location.

9. Bragging Rights

Because of all the benefits, a good credit score is something to be proud of, especially if you’ve had to work hard to take your credit score from bad to good. And if you’ve never had to experience a bad credit score, keep doing what it takes to maintain your good score. It only takes a few missed payments to start getting off track.

Is a FICO Score of 8 Good?

There are multiple versions of the FICO® credit-scoring model, and each is based on a unique formula. The most widely used is FICO® Score 8, which is generally consistent with previous versions but differs in several key ways.

A FICO® credit score is a three-digit number ranging from 300 to 850 (and 250 to 900 for industry-specific scores). Your scores are largely based on your credit reports and can help lenders assess how likely you are to repay debt.

Though FICO® Score 9 debuted in 2014, many lenders still rely on FICO® Score 8 when making lending decisions. That’s why it’s important to know what goes into the FICO® Score 8 credit-scoring model.

What affects your FICO® Score 8 credit scores?

FICO® credit scores depend on the information in your consumer credit reports, so knowing what’s in those reports is a good place to start.

Your credit reports contain information such as how often you make payments on time and how many credit accounts you have open. This information can directly affect your FICO® Score 8 credit scores (as well as scores using many other credit-scoring models). For example, keeping your credit utilization low can help your FICO® Score 8 credit scores, while repeatedly neglecting to pay your credit card bills on time can hurt them.

Here’s a quick look at what goes into your FICO® scores and a few ways that the FICO® Score 8 scoring model differs from some of the other versions.

• Payment history (35%): Your history of paying credit accounts is a big factor in determining your FICO® scores. Lenders understandably want to know whether you’ve paid your bills on time.
• Amounts owed (30%): This refers to how much you owe on credit accounts, such as installment loans and credit cards, and the percentage of your available credit that you’re using (known as your credit utilization rate).
• Length of credit history (15%): FICO® scores take into account how long you’ve had your oldest and your newest accounts. Also considered are the average age of all your accounts and how long it’s been since you’ve used certain accounts. Generally speaking, the longer the better.
• Credit mix (10%): FICO® scores consider your mix of different credit accounts, though it’s not a key factor. These may include credit card accounts, mortgage loans and auto loans.
• New credit (10%): New credit inquiries and recently opened accounts can influence your FICO® scores. For more information, check out our article on hard and soft credit inquiries.

What makes FICO® Score 8 different from previous FICO® scoring models?

Though FICO didn’t reinvent the wheel with FICO® Score 8, it does differ from previous versions in several key ways.

• Isolated late payments matter less. FICO® Score 8 is a little more forgiving of a one-time late payment than previous versions. “Late” generally means at least 30 days after the due date.
• Multiple late payments matter more. FICO® Score 8 may punish numerous late payments more severely than previous versions.
• Small-balance collection accounts matter less. If the original balance on the account was less than $100, FICO® Score 8 ignores collection actions for the account. That’s a good thing, because a collection account can have a significant negative impact on your credit.
• High credit card utilization matters more. According to FICO, FICO® Score 8 is “more sensitive” to higher card usage. Most experts recommend keeping your overall credit card utilization rate below 30%.
• Credit card piggybacking matters less. Credit card piggybacking refers to the practice of being added to someone else’s credit account as an authorized user in order to help you boost your own credit. FICO claims that FICO® Score 8 “substantially reduces any benefit” of this practice.

How do FICO® Score 8 credit scores differ from the scores you see on Credit Karma?

FICO® scores aren’t the only credit scores you’ll see. Another popular credit-scoring model is VantageScore.

On Credit Karma, you can get your free VantageScore® 3.0 credit scores from TransUnion and Equifax. These scores may not match up exactly with credit scores based on the FICO® Score 8 credit-scoring model, but they rely on many similar factors. For example, your credit card utilization rate is considered a high-impact factor in both the VantageScore® 3.0 and FICO® Score 8 credit-scoring models.

Here are some other key similarities and differences among the most popular VantageScore® and FICO® score models.

Credit factor	VantageScore® 3.0	VantageScore® 4.0	FICO® Score 8	FICO® Score 9
Utilization rate	Very important	Very important	Very important	Very important
Historical utilization rate and payment info (trended data)	No impact	May affect your score	No impact	No impact
Collection accounts	Ignores paid collection accounts	Ignores paid collection accountsIgnores medical collection accounts that are less than six months oldWeighs unpaid medical collection accounts less than other types of collection accounts	Ignores small-dollar “nuisance” accounts that had an original balance of less than $100Treats medical collection accounts, including those with a zero balance, like other collection accounts	Ignores paid collection accountsWeighs unpaid medical collections less than other types of collection accounts
A tax lien or judgment	Can have a significant impact	Are less important than before, but can still have a significant impact	Can have a significant impact	Can have a significant impact

Does the FICO® Score 8 credit-scoring model really matter?

That all depends on what you want to do.

In general, if you’re trying to get a new credit card, car loan or consumer loan, then your FICO® Score 8 credit scores can matter. Since FICO® Score 8 credit scores are the most widely used FICO® scores, there’s a good chance a potential lender may use it.

On the other hand, if you’re working with a lender who’s using a different credit-scoring model — VantageScore® 3.0, for example — then that’s may be the one that matters most.

Remember: While FICO and VantageScore Solutions create the formulas, it’s the lenders who ultimately use your credit scores. And it’s the lenders who select which model and version to use. So even when FICO releases a new version of its credit-scoring model, a credit card issuer or auto lender might stick with whichever FICO® version it is already using.

“They can use whatever version they want,” says Joe Ridout, spokesman for the national consumer rights nonprofit Consumer Action.

Major differences between FICO® Score 8 and FICO® Score 9 credit-scoring models

Change takes time. Many lenders are still using FICO® Score 8 even though FICO released a newer, potentially more predictive model, FICO® Score 9.

As long as both credit-scoring models are in use, it’s a good idea to know how they differ. FICO® Score 9 isn’t a dramatic departure from its predecessor, but it does account for certain factors differently.

Here are the highlights.

• Paid collection accounts matter less. If you’ve paid off a collection account in full, it no longer counts against you with FICO® Score 9. With FICO® Score 8, paying off a collection account doesn’t necessarily help your scores. That’s can be an issue, because collections can stay on your credit reports for a long time.
• Medical collections matter less. Until recently, there wasn’t a significant distinction between medical collections accounts and other types of collections accounts — at least in terms of their impact on your credit. But newer credit-scoring models, such as FICO® Score 9, deemphasize the impact of unpaid medical collections accounts.
• Rental payments matter more. FICO® Score 9 cares if you pay rent on time, including rental payment history as a factor in your scores — provided your landlord reports it to at least one of the three consumer credit bureaus. This can be a boon to those who have just started building credit from scratch and don’t have much lender information on their credit reports.

If you’re shopping for a new loan or credit card, it’s smart to find out which credit-scoring model (or models) may be used to evaluate your credit.

“If it were me, I would ask direct questions,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. “Which scores are you using? Which version are you using?”

One credit-scoring model might factor in medical collections, while another might give you the proverbial gold star for years of timely rent payments. The more you know about what goes on behind the scenes, the better you can try to position yourself in the eyes of a prospective lender.

What is Experian Boost?

If you’re trying to raise your credit score, paying your credit card bills on time and lowering your balances are two positive actions you can take. But if you need to bump your score up faster, you may also want to consider Experian Boost.

Experian Boost is a completely free service that allows you to connect your utility and telecom accounts to your Experian credit report, which can potentially raise your credit score.

By linking your bills like monthly water and cell phone service, you can get credit for positive, on-time payments. Experian also recently updated eligible bills to include on-time Netflix payments, providing you with more ways to improve your credit.

Keep in mind that Experian Boost requires that users have at least one active credit account, such as a credit card or personal loan, to sign up. If you want to improve your credit from fair to good, this service can provide a helpful path.

Here are the eligible types of utility, telecom and streaming subscription bills you can link:

• Mobile and landline phones
• Internet
• Cable and satellite
• Gas and electric
• Water
• Power and solar
• Trash
• Netflix

Once you sign up and connect your bills, you’ll instantly receive your new credit score, which may reflect an increase. On average, users see a 13-point increase in their FICO® Score 8, which is based on Experian data.

Of course, results may vary based on your individual report, and it is possible that you may not see a change to your credit score at all.

Since this service is provided by Experian, it only influences your Experian credit report and credit score. Signing up for Experian Boost won’t make a difference in your credit scores with Equifax or TransUnion.

When you apply for credit, lenders may review your credit from any one of the credit bureaus. An increase in your Experian credit score may not improve your qualification odds for a loan or credit card if the lender uses Equifax or TransUnion.

How Does Experian Boost Work?

Normally, utility and phone payments do not factor into your credit scores. When you use Experian Boost, however, Experian uses your bank records to find on-time qualifying payments for these monthly bills. Experian Boost also now factors in on-time Netflix^® payments, giving consumers even more opportunity to improve their credit scores.

By adding these records to your credit file, Experian Boost helps you build positive payment history. Payment history is the most important factor in calculating your credit scores, so adding records of on-time payments can be very valuable.

Keep in mind, Experian Boost only considers positive payment history on these accounts, so late payments will not lower your credit scores.

The length of your credit history also plays a big role in your credit scores. Adding more accounts to your credit file with Experian Boost helps you build credit history by showing more evidence of active accounts and on-time payments.

How Is Experian Boost Different?

Experian Boost isn’t just different—it’s the first-ever service to give users the ability to increase their FICO^® Score in a matter of minutes. So far, over 4 million Americans have connected their accounts to Experian Boost.

As mentioned, certain payments have never before factored into your credit scores. Experian Boost is the first product to change that, boosting your credit scores immediately if qualified on-time payments are found in your bank accounts.

Who Can Benefit From Experian Boost?

Across the country, Experian Boost has raised Americans’ credit scores by more than 29 million points in total. Anyone can sign up for Experian Boost, but consumers with little to no credit and those with very poor to fair credit scores tend to benefit the most.

Out of each FICO credit tier—very poor, fair, good, very good and exceptional—the majority (87%) of people with a very poor score who used Experian Boost saw their FICO^® Score increase. Among people with a fair score, 63% saw their scores increase.

How Much Does Experian Boost Cost?

Experian Boost is completely free. Once you sign up, you’ll automatically be enrolled in a free Experian CreditWorks℠ Basic membership, which offers additional services such as free credit monitoring and a free FICO^® Score.

There is no additional charge to connect your bank accounts, and if you choose to disconnect your account, you can keep your Experian CreditWorks Basic membership.

If you pay a utility, telecom or Netflix bill using your bank accounts, consider using Experian Boost to get credit for your past on-time payments and instantly raise your credit scores. You can always get your free credit score from Experian to stay on top of your credit and see how you may be able to improve your scores.

Can Experian Boost Hurt your Score?

Though Experian Boost is a great tool for consumers who might not have a fat or strong credit file, it isn’t perfect. Here are a few downsides of the service:

• If you’re a long-time avid credit card user who charges everything for the rewards points and pays your bill on time and in full, Boost won’t be very beneficial. Your credit history already includes those credit card payments (which are reported by the card issuer). Adding a few more on-time payments is unlikely to have a large impact on your credit score.
• Lenders might be using a version of FICO or a different credit scoring model that doesn’t take utility payments into account. There’s no guarantee that boosting your FICO 8 score will increase your odds of approval for a specific credit product from a specific lender.
• Boost only looks at cell phone, utility  and streaming video payments. It would be more helpful if it could include rent payments as well.
• As Experian itself points out, adding utility payments to its records won’t affect what’s in your files with the two other major credit bureaus–Equifax and TransUnion. So depending on which bureau a prospective lender or credit card issuer uses, Boost may not help you get approved.

Who is Experian Boost Best Suited For?

Experian Boost is best for an individual who has been making on-time cell phone, utility and/or streaming video platform payments for some time but has never (or only recently) opened a credit card or loan account.

Experian Boost doesn’t work for everyone, though. The free service is best suited for individuals who pay their telecom, utility or streaming video bills through their bank accounts. If Experian Boost doesn’t work for you, you can try other methods to boost your credit score. 

Read Also: 5 Tips to Creating a Cash-Only Lifestyle

Nevertheless, with how fast it is to set up an account with Experian and start the Boost process, it might provide an easy way to raise your credit score by a few points.

Experian Boost is a well-intentioned service. Boost only reports positive payment histories and it’s free, so at least checking to see if you qualify for a Boost won’t harm you. If you’re someone who has a thin credit history who pays their phone or utility bill with a bank account, Experian Boost can be a great way to pump up your overall credit score.

However, with the average score increase of 19 points (and that’s for those with a thin file) this isn’t going to bump anyone from a subpar credit score to a perfect 850.