Any home improvement can be a costly endeavor, and it can become more prohibitive to bad-credit individuals. Traditional credit scoring models put such homeowners at a disadvantage, for debt repayment can take several months and even years to complete.
Fortunately, FICO has rolled out a new system to give bad-credit borrowers a better chance to qualify for a home improvement loan with less interest. Find out below how the UltraFICO score can help you upgrade your old siding, finish your unused basement, or buy an entire set of window coverings from Hunter Douglas in New Jersey, Michigan, Florida, or any other part of America.
What Is It?
The UltraFICO score is based on generally essential factors, including credit utilization, history of payments, credit mix, and the number of inquiries, plus it involves the financial information of consumers from savings, checking, and money market accounts. The supplemental credit data can several points to ordinary FICO scores, helping more consumers be categorized in better credit ranges.
Who Qualifies for It?
There are two primary beneficiaries of the UltraFICO score: consumers with thin files and consumers with bad credit history. This credit scoring system is not readily available to everybody and is only offered to individual borrowers upon the discretion of a lender.
Usually, consumers with credit scores in the upper 500s and lower 600s are perfect candidates. If you are just a couple of points short of being granted credit approval, you might be asked to opt in. In other words, you may be suddenly considered to have fair credit with the UltraFICO score even when you are conventionally viewed as someone with poor credit.
How Can You Qualify for It?
As mentioned, the UltraFICO score is not accessible through every lender yet. Its only distributor at the moment is Experian, so creditors that rely on TransUnion, Equifax, any other credit-reporting agency, or their credit scoring model can’t use the algorithm for generating the UltraFICO score.
The few lenders chosen in the UltraFICO score pilot program includes fintechs, non-traditional creditors, and credit unions.
Moreover, you must keep at least $400 in your savings account on average and avoid having a negative balance in the last three months. Seventy percent of the consumers who meet these conditions have seen a credit score increase with the addition of their supplemental information into the equation. One in every ten consumers with an account in collections have earned 20 points or more.
Is There Any Drawback?
The only perceived downside of the UltraFICO scoring model right now is data security. Since lenders can now access more sensitive pieces of information of consumers, critics worry if such personal details will be adequately protected and kept out of reach of questionable characters.
Of course, the other drawback is lack of accessibility, which is understandable at this point because the UltraFICO score is not yet ready for mass adoption.
If proven safe and effective, the UltraFICO score can be a real game-changer. Most home improvement loan lenders may not be eager to switch to it, but at least it gives many underserved consumers some hope for more borrowing opportunities in the future.