FICO has announced that as of 2019 it will be rolling out a new scoring system after focusing almost exclusively on a consumer’s payment history. FICO’s new scoring system will consider money management in ranking a borrower’s credit score.
Specifically, FICO scores will now look at how consumers manage checking, savings, and money-market accounts — and use that data to make determinations on a borrower’s creditworthiness. The new score is called the “UltraFICO” score.
Although the UltraFICO will be released at the start of 2019, the score will not be widely available. After a short pilot of the UltraFICO scoring system, FICO plans to offer the score to all lenders by the summer.
Factors the UltraFICO will take into account include: (1) an analysis of your average account balance; (2) a history of past overdrawn accounts; (3) an analysis of your deposits v. withdrawals; (4) the amount of time you have had an active checking account; and (5) whether you regularly pay your bills from your account.
There has been a long-standing myth that Bankruptcy can ruin your credit score. Studies, however, indicate Bankruptcy actually helps your credit score. A 2010 Federal Reserve Bank study showed the average credit score at filing was 538. By the time the bankruptcy case discharged, the petitioner’s credit score had risen nearly 80 points. Harvard conducted a study, focused on Chapter 13 bankruptcy cases, that concluded chapter 13 bankruptcy actually increases an individual’s credit score and the probability of becoming a homeowner.
The new scoring system can benefit people in Chapter 7 and Chapter 13 bankruptcy. Since Chapter 7 eliminates your debt, you will be able to start saving and show a positive cash flow on your account. While chapter 13 can assist consumers by establishing regular bill pay activity from their accounts.
You can learn more about the UltraFICO score at: https://www.fico.com/ultrafico/#why-its-important