In spite of not having made online payments on credit cards, mortgage or car-loans, US citizens will now be able to utilize a new type of credit score to validate themselves to lenders. Matt Schulz of CompareCards said that banks have been for a very long time trying to assign credit scores to folks with little or no credit. Fair Issac Corporation announced on Monday that a new model known as the UltraFICO Score will elevate conventional credit risk metrics with information taken voluntarily from bank statements, for instance, proof of saving and payment transactions made on-time. It will be released in 2019 and will make credit access better for people who have little to none. David Shellenberger said that credit information about prospective customers can be gained by analyzing his financial profile. As this reduces the risk of uncertainty, lenders can offer better credits to customers.
Michael Moebs of Moebs Services and other banking experts agree that more data equals better loans. Shellenberger stated that this is good for lenders as a look into a customer’s bank account could provide clear insights about how he manages his finances. He says that people who prevent their accounts from slipping into negative territory or do not bounce checks are evidently better credit risks. Even if a person does not have a credit score, other information like the amount of money in his account or number of times that account has been overdrawn determines how risky he is. Customer advocates too have welcome this change saying that it will give people without a traditional history of borrowing better access to financial lending products.
Chi Chi Wu highlighted that even though the change is promising, it has pitfalls like any other new thing. Moebs added that this will make borrowers concerned about their abilities to handle debt. Schulz said that consumers should be aware of what they are getting into as with the change in market pattern, banks and lenders change. Hence one should not just take money that he is offered without ample consideration.