FICO credit score to add bank account information KATHLEEN PENDER

Next year, lenders will have access to a new FICO credit score that will — for the first time and with the consumer’s permission — include information from a person’s checking or savings account, such as income and outgo, balances and overdraft behavior, FICO of San Jose announced Monday.

FICO’s traditional, widely used credit scores rely only on information about a person’s credit usage and payment history drawn from the person’s report at one of the three big credit bureaus. It does sell other scores, such as FICO XD, which use so-called alternative data, such as payment history from cable and utility data-

bases, but this is done without the consumer’s permission.

The new Ultra score is designed to help people who otherwise would be denied credit because their traditional score is too low or they have no credit history. FICO is positioning it as a “second chance” for borrowers after lenders have looked at their traditional FICO score. However, some lenders may look at it before looking at a potential borrower’s traditional score. In that case, it could end up hurting borrowers who otherwise might have gotten credit, or better credit terms.

FICO emphasized that consumers don’t have to allow access to their bank account information.

“We are being very explicit about the fact that to help you, you need to maintain an average balance of about $400 a month” and not run negative balances, said Sally Taylor-Shoff, a scores vice president with FICO.

The new score also could help mainstream lenders compete with startups such as Petal, a credit card issuer that looks, again with permission, at an applicant’s bank account information, said Matt Schulz, chief industry analyst with Comparecards.com. He added that banks “have been doing this internally for years,” meaning that if a checking account customer wants credit, the bank will look at the customer’s checking account history.

UltraFICO will be available only when lenders pull a report from Experian, the credit bureau that’s partnering with FICO and Finicity on the product. Finicity, based near Salt Lake City, is a data aggregator that will pull information from a person’s bank account, summarize it and send it to Experian. Finicity will not include information about where consumers are writing checks or using their debit cards, at least for now.

“We want to make sure that information (about merchants) doesn’t get in,” to the report or lending decisions, said Chi Chi Wu, an attorney with the National Consumer Law Center.

The three companies say they will begin a pilot program early next year and UltraFICO will be “broadly available to lenders mid-2019.”

However, that’s only if lenders use it. FICO has proven “that it’s really hard to supplant the traditional FICO score with something else. FICO has a hard time supplanting its own scores when it comes out with a new thing,” said credit expert John Ulzheimer.

FICO 9 came out in 2014 “and even though it has been four years, it has not been as widely used as FICO 8, which came out in 2009,” said Ted Rossman, an analyst with Creditcards.com.

Short term, Rossman said UltraFICO “is probably good” for consumers because it will give more of them access to credit. But that’s happening at a time when the economy is booming and delinquency rates are low.

“Some people might get into these loans under the best-case scenario and not be able to pay them back when downturns or recessions occur,” he said.

And although the types of information lenders can access is limited for now, he wonders what could happen if lenders start using other information, such as a person’s assets.

“This might be opening a little sensitive area when it comes to income and assets equaling credit worthiness,” he said.

Schulz said, “There has been a lot of effort made over the last few years to try and get scores for people who have little to no credit. This seems like a big step in that direction. It’s about expanding the universe of borrowers that banks can lend to. Invariably in that group there will be some folks who maybe don’t need credit or shouldn’t get credit. But this is really, primarily, a move to help banks expand the pond they are fishing in for customers.”