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FICO Releases Its UltraFICO Score: What You Need to Know

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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When you need to borrow money, a lender will consider your credit score when determining how likely you are to repay a debt.

FICO® Scores, from Fair Isaac Corp., are the credit scoring models most commonly used by top lenders. In October 2018, FICO announced a partnership with credit reporting bureau Experian and financial data aggregator Finicity to release the new UltraFICO™ Score.

If you’re wondering how and when UltraFICO could affect your credit score, here’s what you need to know.

What is the UltraFICO Score?

The biggest change with UltraFICO is that it looks beyond borrowing behavior to consider bank account transactions to help generate a credit score.

“It’s not a traditional credit score because traditional credit scores are based on your credit report, which actually doesn’t include deposit account information and includes only information about credit accounts,” said Chi Chi Wu, a staff attorney for the National Consumer Law Center, a nonprofit focused on consumer advocacy.

The UltraFICO Score is also unique in that consumers must opt in to link deposit accounts to their credit profiles, Wu said. Only then can FICO and its UltraFICO partners access and collect bank account transaction data and include it in the scoring process.

How will UltraFICO work?

From initial reports, it appears that the UltraFICO Score will primarily be offered as a second-chance score. For example, “One use case is that a lender would invite a consumer who is in the process of applying for credit to participate in the UltraFICO scoring process,” said David Shellenberger, senior director of scores and predictive analytics at FICO.

A borrower who opts into sharing bank account data might then be able to get an UltraFICO Score that’s higher than a traditional score. That is, they might see a boost in their score if the transactions on their reported accounts demonstrate responsible, low-risk financial behavior.

“The score follows the same framework as the traditional FICO Score and is designed to be scaled the same,” Shellenberger said. This means consumers can use the UltraFICO Score as a stand-in for other credit scores.

Here’s an overview of how different FICO Scores are typically classified by lenders:

Excellent credit scores: 800 and above
Very good credit scores: 740-799
Good credit scores: 670-739
Fair credit scores: 580-669
Poor credit scores: 579 and below

Whose scores could increase with UltraFICO?

The new UltraFICO Score could help boost the scores of millions of U.S. consumers, as well as help lenders provide applicants with a second chance to qualify for credit.

Using UltraFICO in this way “is particularly helpful for consumers that may also have very sparse or inactive credit files and can provide visibility into positive financial behavior that may not be accessible via the traditional credit report,” Shellenberger said.

Here are specific details on who’s likely to see a higher score with the UltraFICO model:

  • Consumers with no credit history or without enough credit information on file to formulate a credit score: More than 15 million Americans who were previously unscored with FICO due to a lack of credit history would be able to get a credit score if they participated in UltraFICO reporting, FICO estimates.
  • Account holders with positive financial management in their bank accounts: 7 in 10 consumers who maintain an average savings balance of at least $400 without overdrawing over three months would have an UltraFICO Score higher than their FICO Score.
  • Consumers who have negative marks on their credit history due to a temporary financial hardship or mistake: UltraFICO could point to strong signs of financial recovery and help boost consumers’ scores.
  • People who have “fair” FICO Scores or whose scores are near or just below a lender’s minimum requirements: The new scoring model could provide additional information that could push their score high enough to access new borrowing opportunities and lower rates.

When will the UltraFICO Score be available?

You might not be able to take advantage of this new credit scoring option for several months. A pilot version of the UltraFICO Score will be out in early 2019, before it’s more widely released in mid-2019.

Not all lenders will use the new UltraFICO Score to assess credit applications. FICO has several different scores for different types of lenders and purposes, and some are more popular than others.

The FICO Score 9 that was developed and released a few years ago, for example, adjusted how medical debt, paid-off collections and rental history are considered in calculating a score. As a result, many consumers scored higher under FICO 9 — but it has yet to be adopted as widely as the more popular FICO Score 8.

Still, creditors and lenders interested in serving consumers that barely miss credit requirements might take a look at adding UltraFICO to their application processes. “I would encourage lenders to consider this because it expands their potential customer base,” Wu said.

Consumers interested in the UltraFICO model will likely have to wait until mid-2019 before they might see it in action.

How to build your UltraFICO Score

The UltraFICO Score works to identify whether a consumer’s bank account transactions demonstrate that they are “positively managing their financial affairs,” Shellenberger said.

Similar to how a traditional credit score factors in different elements of a consumer’s credit account history, the UltraFICO will weigh bank account histories and score a consumer on favorable or risky behavior.

If you understand what UltraFICO looks at, you can start managing your checking, savings and money market accounts to set your score up for a boost.

Here’s what you can do with your bank account to help build your UltraFICO Score:

Maintain long-standing bank accounts

“We see that consumers that demonstrate relatively longer relationships with their checking and savings account providers are less likely to go delinquent or default on a credit obligation,” Shellenberger said.

Use your bank accounts often

“Consumers that have more frequent transactions versus those that rarely use their checking or savings accounts are better credit risks,” he added. Simply put, you want to make sure you have money moving into or out of your accounts on a consistent basis.

Avoid overdrawing your account or bouncing checks

Consumers who keep their account balances in the positive will be scored better by UltraFICO, but that’s not always easy.

“Frankly, there are banks that set tripwires for consumers to trigger overdrafts,” Wu said, pointing to “reordering transactions and being aggressive in getting consumers to opt into debit card overdraft protection.”

The best way to protect yourself from account overdrafts is opting out of overdraft protection and closely tracking account balances, deposits and withdrawals.

Develop a strong savings habit

“As we look at the ratio of money coming into [demand deposits] accounts versus going out, if we see a bit more coming in than going out (indicative of saving), this is correlated with better credit risk,” Shellenberger said.

Get a budget in place that helps you live within your means and spend less than you earn each month. Try to widen the gap between income and spending, too, so you’re saving more each month.

Should you be concerned with your UltraFICO Score?

The UltraFICO Score could be a step toward opening up credit opportunities for millions of Americans who can’t qualify with previous scores.

But consumers should consider whether they are likely to benefit from the UltraFICO Score before agreeing to share their bank account data.

Some people’s UltraFICO Scores could be lower than what they’d score with other models. This might be the case if you have spotty financial behaviors and an unfavorable bank account history. And if you already have an excellent credit score, Wu said, you’re not likely to benefit from the UltraFICO Score.

You should also consider your level of comfort with sharing your financial account information. The UltraFICO is a positive use of such data, Wu said, but other potential applications could be worrying, such as debt collectors accessing this data. And last year’s Equifax data breach proves that consumers should be concerned with how credit reporting agencies collect, store and use personal data.

“Consumers participating in this process have greater control and transparency over the financial information that is being shared with a credit grantor,” Shellenberger clarified when asked about privacy and security concerns. “The consumer has direct access to this data and therefore knows exactly what is being shared.” Finicity, Experian and FICO have also set up extensive information security measures and protections to keep users’ data safe, he added.

The reward of getting a higher UltraFICO Score could be worth it for average-credit consumers who need to borrow money — and meet the requirements to do so. If this is you, focus on building your credit now and keep your eyes open for more new on UltraFICO.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
Elyssa Kirkham |

Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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The Best Options for Rebuilding Your Credit Score – October 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

The Best Options for Rebuilding Your Credit Score

A strong credit score is a vital part of your overall financial health. But rebuilding a damaged (or non-existent) credit score can feel impossible. Don’t despair. There are plenty of avenues you can take in order to rehabilitate your credit score and it all begins with identifying your starting point.

How Bad is Your Bad Credit Score?

Before you start to panic about rehabilitating your bad credit score, let’s determine if it’s even bad. Where do you fall in the range of FICO® credit scores? Below you’ll find what your credit score is considered, with ranges from Experian.

  • Above 740: Excellent Credit
  • 670 – 739: Good Credit
  • 580 – 669: Fair Credit
  • Below 579: Bad Credit or No Credit Score/Thin File

Your credit score isn’t the only thing that will keep you from being approved for credit. These factors are common reasons for being declined.

  • Your debt-to-income ratio is above 50%
  • You have no credit score
  • You have been building up a lot of debt recently
  • You are unemployed

In order to focus on rehabilitating your credit score, you’ll need to start with getting a line of credit. This may sound impossible because you’re constantly getting declined. Fortunately, there are options tailored specifically for people looking to re-establish credit.

[Read more about bad credit scores here.]

Rehabilitating a Bad Credit Score (579 and under)

Get a Secured Card

You’ll use your own money as collateral by putting down a deposit, which is often about $150 – $250. Typically, the amount of your deposit will then be your credit limit. You should make one small purchase each month and then pay it off on time and in full. Once you prove you’re responsible, you can get back your deposit and upgrade to a regular credit card.

Check out two of our favorite secured cards below, and more options for a secured credit card here.

Discover it® Secured

APPLY NOW Secured

on Discover Bank’s secure website

Rates & Fees

Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.74% Variable

Perhaps our favorite secured card, Discover it® Secured, has numerous benefits for those looking to rebound from a bad credit score. There is a $200 minimum security deposit that will become your line of credit, which is typical of secured credit cards.  Additional perks include a rewards program (very rare for secured cards) that offers 2% cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter, automatically. Plus 1% cash back on all other credit card purchases. This card has another great feature: Discover will automatically review your account, starting at month eight, to see if your account is eligible to transition to an unsecured card. Discover will decide if you’re eligible based on a variety of credit factors, and if you are, you will receive notification and get your security deposit back.

Capital One® Secured Mastercard®

APPLY NOW Secured

on Capital One's website

Capital One® Secured Mastercard®

Annual fee
$0
Minimum Deposit
$49, $99, or $200
Regular Purchase APR
26.49% (Variable)
Credit required
bad-credit
Limited/Bad

The Capital One® Secured Mastercard® is another option for those who want to strengthen their credit score. This card offers a potentially lower minimum security deposit than other cards, starting as low as $49. Be aware the lower deposit is not guaranteed and you may be required to deposit $99 or $200. You can deposit more before your account opens and get a maximum credit limit of $1,000. There is a feature that will assist your transition from a secured to an unsecured card. Capital One automatically reviews your account for on time payments and will inform you if you’re eligible for an upgrade. However, there is no set time period when they will review your account — it depends on several credit activities. If you receive notification that you’re eligible, you will be refunded your security deposit and will receive an unsecured card.

Rebuilding from a Fair Credit Score (580 – 669)

Apply for a Store Credit Card

You might be used to checking out at a store and being asked if you’d like to open a credit card. While these credit cards come with really high interest rates and are great tools to tempt you into buying items you don’t need, there is a big perk to store credit cards: they’re more likely to approve people with low credit scores. Just be sure to only use the card to make one small purchase a month and then pay it off on time and in full. Unsubscribe to emails about deals and don’t even carry it around everyday in your wallet if you can’t resist the desire to spend. Read more here. 

Those unable to get a store credit card should apply for a secured card to build credit. With proper credit behavior, you can see your score rise and then you may qualify for a store card.

Here are our picks for two store credit cards:

The Walmart Rewards Card offers a great rewards rate. Earn 5% back on purchases made at Walmart.com and on the Walmart app, 2% back on Walmart purchases in stores outside of the introductory offer, and 2% back at Walmart Fuel Stations. The sign-up bonus has the potential to be an excellent value, too. Get 5% back for the first 12 months when you use your card with Walmart Pay for in-store purchases, upon approval. Just remember that your cashback rate on purchases in Walmart stores will go down after the intro offer ends, so after your first year with the card, make sure to do most of your shopping on Walmart.com or in the Walmart app to take advantage of the higher rate you get for shopping that way. Note that this is a store card, so you can’t use it outside the Walmart ecosystem.

The information related to Walmart Rewards Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply.

Target REDcard™ Credit Card

The information related to Target REDcard™ Credit Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms Apply.

Target REDcard™ Credit Card

Regular Purchase APR
25.15% Variable
Annual fee
$0
Rewards Rate
5% at Target & Target.com

The Target REDcard™ Credit Card offers great perks that are sure to please frequent Target shoppers. You receive a discount of 5% at Target & Target.com off every eligible transaction. The discount automatically comes off your purchase — no redemption needed. Other benefits include free shipping on most items, early access to sales and exclusive extras like special items, offers, and 10% off coupon as a gift on your REDcard anniversary each year.* Recently, cardholders received early access to Black Friday deals. Reminder: This card can only be used at Target and on Target.com.

Check If You Pre-Qualify

If you’re on the higher end of the spectrum, you may want to consider checking to see if you’re pre-qualified for any cards. This may help minimize your chance of rejection upon applying because pre-qualification performs a soft pull on your credit. This doesn’t harm your credit score.

Your goal in this credit range should be to use no more than 20% of your total available credit. Pay your bills on time and in full. And keep pumping that positive information onto your credit report until you reach the 700+ category. 

Who You Need to Avoid

Access to credit and loans may come easier than you expect, but that should also be a danger sign. There are several lenders who are willing to provide lines of credits or loans to people with poor credit. These options are often very predatory. If you’re simply trying to rebuild your credit history and improve your credit score, then there is no need to take these offers.

Here are the options you need to avoid when trying to rebuild credit:

1. Payday and Title Loan Lenders – There is never a need to take out a payday or title loan if you’re trying to merely rebuild or establish credit history. Most of these lenders don’t report to the bureaus and you’ll likely end up in a painful vicious cycle of borrowing and being unable to pay it down.

[How to get out of the payday loan trap.]

2. First Premier – The bank claims to want to offer people a second chance when it comes to their finances, but its fee structure and fine print prove the exact opposite. First Premier charges you a processing fee of up to $95 just to apply for a credit card. Then it levies a $75 annual fee on the credit cards and most cards only come with a $300 limit. You’re paying $170 for a $300 credit line! The APR is a painful 36%. In year two the annual fee reduces to $45, but then you’re charged a monthly servicing fee of $6.25. And to top it all off, you’ll be charged a 25% fee if your credit limit is increased. Stay away from this card! Use the $170 it would take to open the card and get a secured card instead.

3. Credit One – Credit One does an excellent job of confusing consumers into thinking they’re applying for a Capital One card. The logos are eerily similar and easily confused.

Creditone

Capital one

While Credit One is not as predatory as First Premier or payday loans, there is really no need to be using one of its cards to rebuild your credit score. For starters, all Credit One cards have annual fees that range from $0 to $75 for the first year, then $0-$99 in subsequent years. If you’re approved for a card with an annual fee, it will be deducted from your initial credit limit. For example, receiving a $300 credit limit and $75 annual fee means you’ll only have access to an initial $225 credit limit. In addition, there is a high 19.99% -25.99% Variable APR. Given the high annual fees, we recommend saving your money and using a secured card with no annual fee to begin rebuilding your credit score.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at [email protected]

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Building Credit

Build Your Credit Score: 6 Secured Cards With No Annual Fees – October 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Secured cards are a great way to build or improve credit. When you open a secured card, you submit a security deposit that typically becomes your credit limit. This deposit acts as collateral if you default on your account, but you can get it back if you close your account after paying off your balance. As long as you use a secured card responsibly — for example, make on-time payments and use little of your available credit — you may see improvements in your credit score. Unfortunately, in addition to the upfront deposit, this credit-building tool can have extra costs, like an annual fee.

You can avoid that expense with one of these six no annual fee secured cards, which have a variety of uses:

Cards to consider

Rewards

Discover it® Secured

APPLY NOW Secured

on Discover Bank’s secure website

Rates & Fees

Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.74% Variable

The Discover it® Secured is a standout secured card that provides cardholders the opportunity to earn cash back while building credit. A cashback program is hard to find with secured cards, and the Discover it® Secured offers 2% cash back at restaurants & gas stations on up to $1,000 in combined purchases each quarter. Plus, 1% cash back on all your other purchases. In addition, there is a new cardmember offer where Discover will match ALL the cash back earned at the end of your first year, automatically. This is a great way to get a lot of rewards without needing to do any extra work. In addition to a cashback program, this card provides valuable credit resources such as free access to your FICO® Score and a Credit Resource Center — just note these services are available whether you’re a cardholder or not. Discover also takes the guesswork out of wondering when you’re ready for an unsecured card (aka a regular credit card) by performing automatic monthly account reviews, starting at eight months of card membership.

What to look out for: There is a high 24.74% Variable APR for this card, so you could end up paying a lot more than purchase prices if you carry a balance. Try not to overspend and make it a goal to pay each statement in full so you avoid interest charges.

Low deposit

Capital One® Secured Mastercard®

APPLY NOW Secured

on Capital One's website

Capital One® Secured Mastercard®

Annual fee
$0
Minimum Deposit
$49, $99, or $200
Regular Purchase APR
26.49% (Variable)

The Capital One® Secured Mastercard® offers qualifying cardholders a lower security deposit compared to other secured cards. You will get an initial $200 credit line after making a security deposit of $49, $99, or $200, determined based on your creditworthiness. Typical secured cards require you to deposit an amount equal to your credit limit, so this card has added perks for people who qualify for the lower deposits. You can also receive a credit limit increase without making an additional deposit after making your first five monthly payments on time. This is beneficial for people who need a higher credit limit and don’t want to (or can’t) tie up their money in a deposit. Also, you’ll have access to CreditWise® from Capital One® and Platinum Mastercard® benefits that include travel accident insurance and price protection.

What to look out for: The $49 and $99 security deposits are not guaranteed and depend on your creditworthiness — that means you may still have to deposit $200. Also, it’s not a good idea to carry a balance on this card because it has one of the highest APRs at 26.49% (variable).

Average deposit

Citi® Secured MasterCard®

The information related to Citi® Secured MasterCard® has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms Apply.

Citi® Secured MasterCard®

Annual fee
$0
Minimum Deposit
$200
Regular Purchase APR
24.24%* (Variable)

The Citi® Secured Mastercard® requires a $200 security deposit, which is typical of secured cards and a good amount to establish your credit line. You can deposit more money if you want to receive a higher credit line, but if you don’t have a lot of money available to deposit, coming up with $200 is manageable. This card doesn’t have any additional card benefits like rewards or insurances, but you can access Citi’s Credit Knowledge Center for financial management tips.

Low APR

Visa® Secured Card from MidSouth Community FCU

APPLY NOW Secured

on MidSouth Community FCU’s secure website

Visa® Secured Card from MidSouth Community FCU

Annual fee
$0
Minimum Deposit
$200
Regular Purchase APR
11.15% Variable

Because MidSouth Community is a federal credit union, you need to be a member to qualify for this card. Membership is limited to people who work, live, worship, or attend school in the following Middle Georgia counties: Bibb, Baldwin, Crawford, Hancock, Houston, Jones, Monroe, Peach, Pulaski, Putnam, Twiggs, Washington, and Wilkinson. If you qualify, you may be able to get a secured card with an APR as low as 11.15% variable.

What to look out for: This card is very restricted, therefore few people will be able to qualify for this low APR secured card.

Unrestricted low APR

Affinity Secured Visa® Credit Card

APPLY NOW Secured

on Affinity Federal Credit Union’s secure website

Affinity Secured Visa® Credit Card

Annual fee
$0
Minimum Deposit
$250
Regular Purchase APR
12.85% Variable

The Affinity Secured Visa® Credit Card requires cardholders to join the Affinity FCU. You may qualify through participating organizations, but if you don’t, anyone can join the New Jersey Coalition for Financial Education by making a $5 donation when you fill out your online application. This card has a 12.85% variable APR, which is one of the lowest rates available for a no annual fee secured card and is nearly half the amount major issuers charge. This is a good rate if you may carry a balance — but try to pay each statement in full.

What to look out for: There may be a membership fee associated with this card if you don’t qualify through participating organizations. The fee you may have to pay is low at $5, but it may be an issue for people who don’t want to pay anything to open a secured card.

Unrestricted federal credit union

Savings Secured Visa Platinum Card from State Department Federal

APPLY NOW Secured

on State Department Federal Credit Union’s secure website

Savings Secured Visa Platinum Card from State Department Federal

Annual fee
$0
Minimum Deposit
$250
Regular Purchase APR
14.24% Variable

The Savings Secured Visa Platinum Card from State Department Federal is open to anyone, regardless of residence. If you aren’t eligible through select methods including employees of the U.S. Department of State or members of select organizations, you can join the American Consumer Council during the application process. There is no fee associated with joining since State Department FCU pays the $8 on your behalf. There is a rewards program with this card where you earn Flexpoints, which can be redeemed for a variety of options like gift cards and travel. The APR can be as low as 14.24% variable, which is reasonable considering many secured cards from major issuers are above 23%.

What to look out for: If you decide to take out this card and become a member of the SDFCU by joining the American Consumer Council, make sure you do not go to the ACC’s website and submit a donation. That fee is waived by the SDFCU when you fill out your credit application. Simply select “I do not qualify to join through any of these other methods” and select the ACC from the menu to avoid the fee.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at [email protected]

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