New FICO Score Could Change the Way You Borrow to Buy Your Next Home

The Fair Isaac Corporation – the ones who created the FICO score in credit – has announced that they’re unveiling a whole new credit scoring method… and it could affect the way you borrow.

The new FICO score, called the UltraFICO, is a different scoring model that’s currently in beta testing with a small group of lenders. It’s supposed to change the lending landscape drastically, so here’s what you need to know.

FICO vs. UltraFICO

Your FICO score only counts the money you borrow – like your credit cards, your auto loan and personal loans. It doesn’t account for the cash you have stashed in savings and checking.

The UltraFICO does count those things – it ranks your banking behavior, on-time credit payments and even money market accounts based on account history, balances and activity. The UltraFICO score is supposed to show lenders whether you engage in “responsible financial behavior,” and it can seriously affect your score.

Is UltraFICO Replacing Your Regular Credit Score?

For most people, UltraFICO won’t make a difference – at least not at first. Most lenders will continue to use your regular FICO score to determine your creditworthiness. However, if you don’t qualify using your regular FICO score, lenders can ask to see your UltraFICO – which isn’t actually calculated unless you give a lender your permission to look at all your financial information.

It looks like the UltraFICO score will benefit people with borderline credit and those who have limited credit histories. However, it’s probably not going to help people with little or no savings to build up their credit ratings – and in fact, you may want to steer clear of the UltraFICO if that’s your situation. (Don’t worry – more than 60 percent of Americans have “very little” or no savings funds at all, so you’re not alone.)

Check out this infographic about what makes a good score:

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