There are many ways to improve your credit, but most of them require consistent time and effort. However, a new pilot program from popular credit scoring company FICO® could change that. If the program goes well, your banking history might soon become a part of your credit score. And that’ll make it easy to bolster your credit based on positive behavior you’ve already been exhibiting.
A New Credit Score to Include Banking History
Up until recently, credit scores have been calculated based mainly on how you handle credit. The only exception to that is the inclusion of things like missed utility payments or tax liens and civil judgments on your credit reports, though the latter two are changing due to stricter enforcement on how these public records are reported.
Now, however, there might be a chance to include your banking history in your credit scores. This is great news to anyone who has had a longstanding, positive relationship with their bank. It’s also good news for people new to credit, as they can establish a positive banking relationship and see that in turn help them build credit.
The new score, called UltraFICO™, has been launched by FICO® as a pilot program. In their words, this score “will initially be available through a small group of lenders as part of a limited pilot phase for consumers who cannot currently access credit or, in certain cases, could be eligible for better terms.” FICO® goes on to say that the pilot was “designed for fine-tuning of the deployment of the score” and “will be more broadly available” when the pilot is complete.
As for how many consumers this could impact, FICO® is setting the bar high. The leading credit scoring company says that more than 15 million consumers who don’t have a FICO® score right now could receive this new score. The company goes on to say that building a steady savings can help, as maintaining a savings account balance of $400 on average without also having any negative balances can help seven out of ten people increase their UltraFICO™ score.
How to Benefit From The New UltraFICO™ Score
So, how can you take advantage of this new score? Although it’s only a pilot program right now, you can sign up for updates about its broader availability here. In the meantime, get ready to maximize the benefits of this score by taking a look at your banking history.
First of all, if you don’t have a bank account, now’s the time to open one. Then, never let the account go negative and never bounce a check. Negative balances and bounced checks can hurt your banking profile, thus removing the benefit of having it included in your UltraFICO™ score.
If you already have a bank account and have some negative items to clean up, focus on doing that now. Work with a representative of your bank to bring your account into a positive balance. Once you have a positive balance, work on maintaining it. Only write checks or swipe your debit card if you have enough money in your account. Avoid relying on overdraft protection to cover excess expenditures. Overdraft protection is a type of credit. It can be beneficial at times (for instance, if you accidentally write a check you can’t cover), but it comes with fees that can add up.
Another thing you can do is utilize technology to help you build good banking habits. Many large banks offer automatic transfers from checking to savings accounts. Even transferring an amount as small as $25 per month can add up. And if you have direct deposit, your HR representative might be able to help you set up a split deposit with each check. With that, you can send a certain portion of your check to your savings account each pay period.
Finally, if you have a ChexSystems report, dispute any inaccuracies on it. Read here to find out how to dispute errors on a ChexSystems or other “debit” reports.
FREE Tool: Are there errors on your credit report? Find out and dispute them!
Start Now to Benefit From Credit Score Changes Like This One
The road to building or improving credit can feel like a long one at times. The sooner you get started on that path, the sooner you could see positive results. With the new UltraFICO™ score, you may ultimately be able to better prepare yourself by establishing positive or better banking behavior today.
And when you do, you’ll not only enable yourself to have more access to credit, but also to lower interest rates on that credit. In other words, you can get more financial opportunities and for a lower cost.
Take control of your finances. Read everything you need to know about credit scores and credit reports.