Did you hear about the new UltraFICO credit scoring system starting in 2019?
The UltraFICO aims to help people with low credit scores get qualified for a mortgage or line of credit. But will it really be able to do this or is it just a myth?
Let’s take a look!
This UltraFICO score will consider both your personal credit score AND your banking habits to determine your credit worthiness.
The Good:
As the Wall Street Journal reported, “FICO said about seven million applicants who have low credit scores as a result of thin borrowing histories would likely see their scores improve under the new system. Separately, some 26 million subprime borrowers will end up with higher credit scores, with nearly four million seeing an increase of at least 20 points.”
For example, if you have less than a 680 credit score, more than likely, you would be denied for a mortgage, even if you can afford the payments. But this new scoring model may give you a bump of 20 points or so to help you get qualified by looking at your banking habits!
The Bad:
Let’s say you have slightly above a 680 and the lenders want to use the UltraFICO just to ease their worries… now, you may not qualify for a mortgage or line of of credit if your banking behavior is not up to the bank’s standards.
Here are some things that they will look for:
– An average bank balance of $400
– Age of your banking history, how long you’ve had the account
– How many different types of accounts do you have? (Checking, Savings, Line of Credit etc)
– No overdrafts in the past 3 months
The Ugly:
People are already confused about what goes into calculating their credit score… now they are adding several new factors to add to the confusion! This is an alternative to traditional scoring, NOT a replacement but most cases it will not be up to you to decide what the lenders will chose to use.
Also, we are talking about people with a low credit score… are they REALLY going to have an average balance of $400? It’s mostly all HYPE! Of course most of these generally good people are having financial issues and over-drafting their accounts, that’s why they haven’t been paying their bills on time! To think, someone that has been struggling to get a home due to the debt they already have, now barely qualifying to pile $150,000 more debt to their burden!?
It’s like sticking a little bunny in a cage then dangling a carrot over a bear trap in the middle of it! Sounds good at first but it will only turn out a financial blood bath while making the banks richer in finance fees.
Another thing to consider, most mortgage lenders want to see your banking history ANYWAY! They make you print off the last 3 months of history and they want to make sure you haven’t had any large unexplained cashflow issues such as large deposits or withdrawals. This new score just opens the gate for them to look even further into your banking past, they may even ask for your online log-in information for your bank so their software can look at your history. This opens up privacy and ID-theft concerns, who knows how long they will keep a record of it, who else will see it and how secure it will be going forward!
Lastly, they still can choose to look at your credit and decide you are too much of a risk, even after having you expose all your banking history.
The Solution:
To avoid all of this, you should strive to have the best score possible at all times!
We are partnered with Novae Money one of the fastest growing names in credit education!
Not only do they offer a service to rapidly increase your score, you also get budgeting software that links to your bank accounts so you can identify trends and holes in your spending, before the lenders do!
You also get a debt elimination tool that you can plug in all the juicy details about your student loans, car note etc and it will show you how to pay them off faster and save thousands in fees by doing so! This also helps increase your score and improve your credit worthiness!
It’s up to you, but if you are interested here’s a link to get started.
This new UltraFICO score may help those that could barely qualify for a home but it may also just be a trap to burden millions more Americans with debt that they cannot truly afford. It’s best to get out of debt and only use it to acquire assets and business deals that can bring you more assets, rather than just another bill. Join Novae Money and learn how to increase your finances, there is also an affiliate program that can help you earn additional income as well!
To learn about the affiliate program where you can earn bonuses by helping others check it out here.