"Ultra-FICO" to Boost Credit Scores Giving Millions More Access to Credit

Just in the nick of time not: Fair Isaac is launching a new type of credit score that will give millions more credit.

Just as the economy is peaking, consumers with a low FICO could get a higher "UltraFICO", a new score that factors in bank-account activity as well as loan payments.

Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.

Fair Isaac Corp., creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts ever for credit-reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.

The UltraFICO Score, as it’s called, isn’t meant to weed out applicants. Rather, it is designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.

The new score, in the works for years, is FICO’s latest answer to lenders who have been clamoring for a way to boost loan approvals.

UltraFICO is the latest in a recent series of changes by credit-reporting and scoring firms that are helping boost consumers’ credit scores.

Equifax, Experian and TransUnion last year began deleting most tax-lien and civil judgment information from credit reports. They also have been removing certain accounts in collections, following settlements with state attorneys general dating back to 2015 over how they manage errors and certain negative information on credit reports.

Eight million consumers who had collections accounts completely removed from their credit reports in the 12 months ended in June experienced a credit score increase of 14 points on average, according to a recent Federal Reserve Bank of New York report.

What Can Possibly Go Wrong?

  • We are in the final inning of an economic recovery
  • It would be unusual if bank account balances did not look better
  • FICO will loosening credit standards on top of collections updates

Late Cycle Lunacy

The changes are not meant to weed out applicants. Rather, they are specifically designed to boost the number of approvals for credit cards, personal loans and other debt.

These kinds of changes are best made after market and recession bottoms. By all means give more credit to those who handled themselves well in times of stress.

This is more late-cycle lunacy.

Mike "Mish" Shedlock

Comments (27)
No. 1-18

The only "blemish" on my record is I don't use credit enough, so my score has room to "improve". Of course everyone who reads this blog sees the irony / racket in the situation: one needs to take on more risk unnecessarily to be deemed worthy of a perfect score.


I've closed two credit cards, so my "ratio" dropped so my credit score got worse although in one case I rarely used it, and not at all in the prior 3 years, and in the others, because the annoying customer service drove me to just use a second card (they had different cashback offers).

Death by algorithm. It used to be your banker knew you and if you were a good risk. Now it is all AI, Algorithm, scoring, or whatever which correlates until it is gamed.


The sales potential from high risk credit customers is appealing to companies. The best way to accept more credit and take the least amount of incremental risk is to lower the score cutoff criteria. So, I'm a bit surprised if they really expect to get anywhere by using the Ultra score to override the regular FICO score. There might be an application for those with no credit file or for customers with files that have too little information to produce a score that differentiates the risk.


It has always seemed strange to me that a person with money in the bank, and no debt, would be considered a poor credit risk, simply because he has little or no payment history. These people should have higher credit ratings than the current system, so this seems like a reasonable change to me. Note, however, that unlike what Mish is warning, it probably won't make a substantial change in the total lending picture. Why not? Precisely because these people have a low rating because they never borrow, and raising their rating isn't going to change that; they still will do things as they always have. They will keep money in the bank, and not borrow.


The 'hook' is that FICO is getting even more data, on transactions in cash accounts, than previous. Just as they might be using such data to create more products today to help lenders loosen credit, the additional data they're accessing may very well be used in the future to tighten credit.

For example, an individual who has an emergency fund and loses their job can probably forestall deterioration of their credit score for at least a few months, by reducing payments, by prioritizing payments, etc. Current models don't really "look" into a cash chequing account and analyze the transactions. At best, only a balance is report, if at all. But if FICO can see account transactions, for example, their algorithms will be able to 'see' very quickly after a layoff, that a paycheque is no longer arriving. And scoring derived from such can very quickly be re-calibrated to indicate significant credit stress ahead.

In short, during the 2008/2009 crisis, a lot of lenders were caught with their pants down because their reliance on FICO scoring which is a rather blunt instrument, was too easily manipulated, and quite frankly, way too slow to react to actual changes in circumstances. The first thing that many borrowers did when they realized that a new job wasn't going to be right around the corner was max out their cards simply to preserve liquidity. These efforts are aimed at avoiding such during the next round of credit crunch.