FICO to Announce New Credit Scoring Formula for High-Risk Consumers in the U.S.
Friday, April 3, 2015
FICO, creator of some of the most widely used credit scores in the U.S., will reportedly announce a new scoring formula designed to help high-risk consumers access credit, the Wall Street Journal reported Wednesday. The model will incorporate consumers’ payment history on things like utility, cellphone and cable bills, in addition to how often a consumer changes addresses.
Some consumers may have already been affected by the new score, which has yet to be named. FICO says it has been working with 12 credit card issuers, which were not disclosed in the Wall Street Journal report, to test the new score in lending decisions since November. The score is expected to be offered on a national scale by the end of the year, which will give lenders the ability to reliably score an additional 15 million consumers, according to FICO.
This announcement raises many questions about how the score will be used and how it may affect consumers who already have credit scores. FICO did not immediately respond to requests for comment from Credit.com, but here’s what we know so far.
What We Know About the New FICO Score
The score will open up credit access to as many as 53 million consumers who do not have credit scores or credit reports. Such “unscoreable” people generally can’t get credit products and may have trouble securing housing, utilities or a cellphone, because companies outside of the credit industry use credit history to make business decisions. Those credit histories come from thethree major credit reporting agencies: Equifax, Experian and TransUnion.