An upcoming program could help you obtain a loan or credit card from certain lenders even if your credit history has been spotty or your credit score is low. But it will have some important downsides to consider. Called UltraFICO, the program will be launched in 2019 by Fair Isaac Corp., which created the widely used FICO credit-scoring system. While FICO’s credit scores consider only credit-report information, the new UltraFICO score also will consider your handling of deposit accounts, such as checking, savings and money-market accounts. UltraFICO may boost your score if you handle bank accounts in ways that the scoring system considers responsible—for example, by keeping account balances above $400 and not recently overdrawing accounts. (It could also lower your score if you haven’t done these things.)
UltraFICO allows borrowers with marginal credit scores in the high 500s to low 600s to improve those scores by just enough to qualify for loans and credit cards (but not mortgages). The catch: It will be able to provide only a small point boost, and if it increases your score by just enough for you to qualify for a loan, the loan terms might be terrible—people who barely qualify tend to be offered the worst interest rates. On the other hand, qualifying for a loan and then paying it back in accordance with its terms can help borrowers improve their credit scores and potentially receive more favorable terms in the future.
Participating in UltraFICO will be voluntary but requires that you share the log-in credentials for your bank accounts, such as user names and passwords, with the financial-data-aggregation company Finicity, which means that a data breach might expose this information to thieves. To reduce this risk, after your loan application process is done, you could change your account log-in credentials.