You may have heard FICO is testing a new score (announced in early April 2015) that incorporates alternative data (like property records and utility bills).
There’s still some confusion about the score, however, and what it means for consumers, so we reached out to FICO spokesman Jeffrey Scott for clarification.
What kind of information does the new score take into account?
The score incorporates a variety of information pulled from LexisNexis and Equifax databases, including utility and telecommunications bills (supplied by Equifax) and property records (from LexisNexis).
As with all things FICO, the exact recipe is not publicly disclosed.
My FICO score is already excellent — do I now have to worry about an overdue utility bill messing it up?
The new alternative FICO score is completely separate from the standard one – and it’s only for those who don’t have enough traditional credit data to generate a standard FICO score.
“In fact, people who have standard FICO scores will not receive alternative FICO scores,” Scott says.
So, if you’re actively building your credit, the new score isn’t something you’ll need to worry about (although you should still pay your utility bills on time).
However, the new score may help those without a traditional credit history get credit. In fact, FICO estimates it will let lenders get a read on about 15 million additional consumers. Those consumers previously flew under FICO’s radar for a variety of reasons, the most common being newness to credit (perhaps because of their young age or recent arrival in the U.S.), avoidance of credit products and inability to get credit, Scott says.
I’ve seen some headlines indicating that how often you move will affect the new score. Why do lenders care about something like that?
The new score does take publicly available property records into account, which show how long you’ve lived at a given address.
“FICO’s research has found that fewer moves, regardless of whether a residence is rented or owned, correlates with a higher propensity to pay bills on time,” Scott says.
Again, if you have a standard FICO score, this isn’t something you have to worry about.
When would a lender use this new score?
Say a lender or card issuer tries to pull a FICO score for you and finds you have no standard score. The lender might then use the alternative score to make a decision, Scott says.
What’s the range of the new score?
The new score has the same familiar 300-850 range as the traditional FICO. An alternative score of 700 would indicate a similar credit risk as someone with a standard FICO of 700, Scott says.
When will the score become widely available to lenders?
The alternative FICO score is still being tested, and FICO expects it to be generally available later this year, Scott says.
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