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Credit scores for decades are mainly based on borrowers' payment histories. It's about to change.
Fair Isaac Corp.,
FICO, + 0.03%
creator of the widely used credit score FICO, plans to set up a new scoring system early 2019, which takes into account how consumers manage money in their chequing, savings and loan accounts. Money Market. This is one of the most significant changes in FICO credit reporting and rating system, the foundation of most consumer loan decisions in the United States since the 1990s.
The UltraFICO score, as it is called, is not intended to eliminate the candidates. Rather, it is designed to increase the number of credit card, personal loan and other debt approvals by taking into account borrowers' history of cash transactions, which could indicate their likelihood of repayment.
The new forecast, which has been in place for years, is FICO's latest response to lenders who, after years of generally cautious lending, are looking for ways to increase credit approvals.
This is happening at the same time that the consumer credit market appears to be relatively healthy. The unemployment rate is low and the balance of consumer loans, including credit cards, auto loans and personal loans, is at record highs and lenders are looking for ways to continue to grow their lending.
A developed version of this report appears on WSJ.com.
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