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credit & debt

Getting a Loan Could Get Easier

UltraFICO will benefit young people and retirees with limited credit history.

We asked Gerri Detweiler, a credit expert and education director at Nav, a small-business financial management platform, about UltraFICO and consumer credit.

FICO recently announced a new credit score called Ultra­FICO. How is it different from the traditional FICO score? Traditional credit scores rely primarily on information from the credit bureaus. UltraFICO also looks at how you handle your banking accounts. Consumers who have a monthly balance of $400 or more in their checking or savings account for the previous three months and have no bounced checks or overdrafts could use their UltraFICO score to boost their traditional score. A consumer gets to choose the bank account to be scored. Presumably, you would use your primary account. It could help people who don’t have much of a credit history, such as younger adults and immigrants.

Could some older adults benefit from this score as well? Some older adults don’t have much of a credit record because they’ve paid off their mortgages and car loans. If they wanted to apply for a new auto loan and take advantage of a low interest rate, UltraFICO could show lenders that they have plenty of money in the bank.

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Can I request that credit bureaus use an UltraFICO score instead of a traditional credit score? No. You don’t choose the score a lender uses. The lender will run its preferred credit score first, and if there isn’t enough information to produce a score or the score is close to qualifying but not quite there, the lender can use the UltraFICO score if the consumer opts in.

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Traditional credit reports and scores aren’t going anywhere. But we are moving into an era of using other data to help lenders make financial decisions, and that can help put consumers in the driver’s seat.

How can consumers improve their credit scores? Be vigilant about making sure that everything gets paid on time. Payment history is the strongest factor in your credit score. If you don’t qualify for a credit card, consider a secured credit card, with which you get a credit line based on a cash deposit you make when you open the account. The other option would be a credit-builder loan. With these, which are usually offered by credit unions or community banks, you’re actually borrowing against a savings account offered by the financial institution. Once the loan is paid off, the funds are available for you to use.

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