Nearly 4M to Get a Credit Boost: Good for Mortgages?

October 23, 2018

Many consumers may see their credit scores move higher, following an announcement on Monday from FICO, a leading credit scoring company. FICO, Experian, and Finicity announced a new pilot program that will consider how prospective borrowers manage their cash that could move credit scores higher. Credit scores are a critical component when qualifying for a mortgage and getting the lowest rates.

4M to get credit boost

© Anastasiia_New - iStock/Getty Images Plus

The program, called UltraFICO score, aims to help people who have dings on their credit histories to also have their banking activity factored into their score. For example, this could include how long accounts have been open and any evidence of savings on the consumer’s part.

Consumers who have credit scores in the lower numbers—such as the upper 500s to lower 600s—or who have limited history or previous financial problems will likely benefit the most. Some of their scores could go higher under the new system, David Shellenberger, the senior director of scores and predictive analytics at FICO, told CNBC. Nearly 4 million consumers could potentially see an increase of 20 points or more in their FICO score, he says.

“We’ve found a new way to use consumer-permissioned data that allows lenders to make better decisions and helps consumers gain access to credit,” says Alex Lintner, the president of consumer information services at Experian.

But not all in the financing industry think that finding ways to boost credit scores are a smart move in opening the door to more credit card or mortgage approvals. “While this generally sounds like a good thing for consumers, the concerning part—the solution in search of a problem, if you will—is the focus on boosting approvals,” Ted Rossman, CreditCards.com’s industry analyst. “Going in with the idea of increasing approval rates is a slippery slope.”

The UltraFICO score is slated to be available to lenders by mid-2019.