Fico score explained
New UltraFICO Score Explained
Have You Heard of the New UltraFico Score?
A lot of people seem concernedВ about the New UltraFico Score. Despite press running this news as a positive thing, people are generally skeptical because they donвЂ™t understand what itвЂ™s all about if itвЂ™s changing the whole system, and really, theyвЂ™re concerned if theyвЂ™re going to get punished because of how fragile credit scores are known to be!
The simple version of this blog post is just this- The New UltraFico Score is an optional reconsideration вЂњace up the sleeveвЂќ for applicants that are having difficulty getting approved for personal loans, or credit cards; moreover itвЂ™s an optional instrument primarily used to boost credit score and not a mandatory factor as of now.
To spell it out a little more clearly- the New UltraFico Score also is not planned to be a maintained factor, but in a scenario where you apply for a credit card and you get deniedВ based on thin credit history, this possibly could be beneficial to then ask for a reconsideration with the New UltraFico Score in order to give you a boost (as much as 20 points) in order to improve your odds of approval!
How is the New UltraFico Score Calculated?
The New UltraFico Score is being calculated primarily in three main ways:
Additionally, this score is calculated on a 3-month basis, meaning that if you overdrew your account 4 months ago but have been handling your finances responsibly with $400+ in your account for the last 3 months, you possibly have the best chance to get a better credit score which means approved for the loan or approval for the credit card youвЂ™re hoping for!
Who Should Consider the New UltraFico Score?
Recent statistics will show as many as 7 million applicants have low scores due to thin credit history, and some 26 million subprime borrowers will actually end up with higher credit scores, with reports stating nearly 4 million people could see an increase of at least 20 points.
All in all this NewUltra Fico Score is most appealing to 3 Main Groups of People!
1) Financially Uneducated
2) Recent Graduates
3) Internationals who donвЂ™t have history established.
There actually happens to be a large demographic of people who consider вЂњcreditвЂќ to be an evil or dirty thing. The people who understand that having long credit lines, multiple lines of credit, and multiple accounts managed, reap the benefits of better credit scores and cheaper loans, mortgages, etc, and the ones who donвЂ™t understand this, well they donвЂ™t!
There is a saying, the best day to plant a tree was 5 years ago, but the second best time is right now. Length of credit on the current FICO system makes up for 15% of your credit score, and the more aged accounts you have open the longer your average length of credit history will be! That said the new score looks to still reward those whom otherwise may have neglected this area of their finances and rewards them with improved approval rates.
Unfortunately, it isnвЂ™t usually until most Americans mid-twenties where they start understanding the importance of credit and what role it plays for them in their life. Just like the financially uneducated group, their thin credit history could be preventing them from getting the credit card they actually deserve or approved for a loan they actually need.
Internationals are finally the last category of people that still benefit from this FICO score because of their complete lack of history, despite the fact that anyone of them could be extremely financially disciplined.
The Overall Benefits:
The old model for all these cases was decaying only because otherwise trustworthy people would end up having to go through the process of getting a secured card, a student card, or a starter card, as their first step to establishing credit; but with weak credit line limits, and cumbersome rules getting the higher lines of credit (like ChaseвЂ™s Sapphire Reserve- a $10,000 Minimum Travel Card) may be able to be avoided altogether with FICOвЂ™s reconsideration вЂњUltraFico ScoreвЂќ, but only a possibility because of unknown underwriting at the major United States creditors.
ItвЂ™s also good because people generally get punished for small mistakes on their credit report. One missed payment can be all it takes at the wrong time to have your score drop out of a prime rate for an honest mistake. With the new optional Ultra Fico Score, there still is hope.
Furthermore you can actually choose which bank account youвЂ™d like the Ultra Fico Score pulled from, so if you have вЂњsacred bank accountsвЂќ (bank accounts where you keep running for rainy days), it may be a good time to start being slightly more active on it now just so you have the three month head start when FICO checks to see your number of transactions in the account, for that higher score you probably deserve.
Final thoughts are that the true beauty of the Ultra Fico Score is that it is optional and truly the ace up the sleeve for difficult times. Additionally, there probably is still going to be more details revealed, such as how does current credit utilization rate affect the Ultra Score, but generally speaking as the Ultra Fico Score is- there is only reasons to rejoice and celebrate than fear the unknown!