Changes Coming to Credit Score Calculation

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Delta Jones Walker

I often express to my clients the importance of obtaining and/or maintaining a good credit score. Good credit affords opportunities to get approval for major purchases, loans, mortgages and in some cases, employment. There are a few changes coming this spring to how our credit scores are calculated that may be beneficial to those who are trying to improve their financial profile.

Financial institutions are finding that they need to grow their pool of borrowers to include those who have little to no credit history and those who don’t have the best bill payment history but still have cash to repay loans. With these goals in mind, a new system called UltraFICO is being implemented to build the amount of loan approvals.

With UltraFICO, credit-reporting agencies will examine your bank account activity to see how well you manage your money. For example, is your checking account often overdrawn or do you keep more than the required minimum balance in the account? Keeping at least $400 in your account at all times may work in your favor when it comes to increasing your UltraFICO score.

Other opportunities to display your responsible financial behavior include the monitoring of your savings and money market accounts. Any evidence of consistent saving habits and growth activity works in your favor and could potentially mean a boost of 20 or more points on your UltraFICO score. This could then mean the difference between the purchase of a newer car versus an older one that your regular credit score dictates.

Keep in mind that having an UltraFICO score is not mandatory, but can be worth exploring if you feel you have evidence of responsible money handling habits when it comes to your checking, savings and money market accounts.

According to the FICO website, “Your UltraFICO Score lets you show lenders indicators of responsible financial behavior, not visible on your traditional credit report, including: evidence of savings, a healthy average balance, maintaining a savings/checking account over time, the avoidance of negative balances and the regular payment of bills and other transactions.”

If you are preparing to make a major life move that involves money and will require a credit check, take the time to learn more about the UltraFICO score. It will initially be available through a pilot program with a small group of lenders, but once fine-tuned, a more comprehensive roll-out will take place.

It’s your credit. Learn as much about it as possible! For more information about UltraFICO, visit www.FICO.com.

Connect with Delta Jones-Walker and Atled Financial on Facebook, Twitter: @Atled_Financial and LinkedIn! To schedule a complimentary consultation or a presentation to your group or organization, call 219-513-3710 or email djwalker@atledfinancial.com and mention this column. Topic ideas for this column are welcome!

*Securities and advisory services offered through Woodbury Financial Services, Inc., member FINRA/SIPC. Insurance services offered through Atled Financial Group 717 B Main Street Schererville, IN 46375 which is not affiliated with Woodbury Financial.

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