In late 2018, your mind may have been in other places, like what to get the kids for the holidays or preparing to file your taxes. Late 2018 also marked a new way to calculate your credit score. It’s called UltraFICO, it’s a collaboration between Experian credit reporting company, FICO, and Fincity. It’s designed to boost your credit score, so it’s definitely something you should know about. We’re here to help you understand what an UltraFICO score is and how to use it your advantage.

What is UltraFICO?

Most people have heard of a FICO® credit score. It’s one of the main factors in your ability to get a loan. A low credit score adversely affects your ability to get a loan.

UltraFICO helps by giving lenders an additional picture of your credit and financial situation. It takes into consideration the amount of time you’ve had different accounts, how much money is in those accounts, how often you make transactions, and funds in your accounts at any given time.

You can get your UltraFICO score when you and the lending firm opt-in to the program. So if you’re not pleased with your credit score and your lender participates in the program, you can request an UltraFICO score. To qualify for UltraFICO, you must:

  • Have no negative account balances within the last three months
  • Have an average account balance of $400 over the previous three months
  • Apply for an UltraFICO score with a lender who uses Experian, one of the partners in the UltraFICO program

The program is designed to help people boost their credit scores. It most benefits people with scores ranging from the high 500s to the low 600s, according to US News. These may include young people without much credit or people working to re-establish their credit. If you have a good credit score, you don’t qualify to participate in the UltraFICO program. If your credit score is too low, it’s also likely that the program won’t help you.

FICO introduced UltraFICO at the end of 2018, with plans to launch a pilot program in early 2019. A broader rollout is expected in mid-2019, Motley Fool reported. UltraFICO likely won’t be broadly used as a credit score assist for a few years down the road.

What are Potential Downfalls?

While UltraFICO stands to help many, it comes with a few caveats. UltraFICO requires at least $400 in your accounts. And if you drop to a negative balance and stay in a negative balance, you lose the opportunity to have an UltraFICO score.

Some worry that the UltraFICO model adds more risk of defaulting on loans, but FICO says that the paperwork coming from banks and lenders shows that people won’t be defaulting because they have the money in their accounts and a history of spending.

Handling cash well is not the same as managing your credit. The algorithm FICO® and other credit score companies use are designed to measure risk and see if you’re a good candidate for banks loaning money to you. Some view UltraFICO as a way to override the entire purpose of a regular credit score.

If you’re working on your credit, it may seem like UltraFICO is the way to go. Be aware that it may take a while for lenders to get on board and may not help your credit score enough to get what you truly need.

IMAGE: Nick Youngston / CC BY-SA 3.0