April 1st, 2015 | About your Credit!
The Wall Street Journal reports today that the way is being paved for millions of those who pay bills on a timely basis, but do not have traditional credit that reports to the 3 major Credit Bureaus.
Read the full article below.
WALL STREET JOURNAL
Apr 1, 2015
FICO Gives Millions a Path Toward a Decent Credit Score
By AnnaMaria Andriotis
There is already evidence that a new credit-scoring approach by Fair Isaac Corp. will provide a pathway to decent FICO scores for some consumers who currently don’t have traditional scores.
Fair Isaac, also known as FICO for its trademark credit scores, is expected to announce a new approach as soon as this week that uses alternative data, including payment history with cable bills, cellphone bills, utility payments and other factors.
Of the 53 million Americans who don’t have traditional FICO scores, 15 million already can be scored with the new approach, which isn’t yet named, FICO says. And some one-third of those individuals have a score under the new system that is above 620, the company says.
The new FICO score, like the traditional ones, ranges from 300 to 850. Lenders, including credit-card issuers, car-loan lenders and a growing number of mortgage lenders, often approve applicants with traditional FICO scores above 620. That suggests that the new score could help identify people who can handle debt responsibly but have previously been shut out of getting financing.
The percentage of individuals getting scores above 620 on the new gauge “is a good indication that this is a process to onboard more consumers and allow them to maintain more creditworthiness,” says Jim Wehmann, executive vice president of scores at FICO.
Among the potential new crop of borrowers created by the new credit score, those who successfully apply for a credit card and handle their payments well—avoiding falling behind on payments and maintaining low balances—for at least six months will then receive regular FICO scores, the company says. That will make it easier for them to get approved by other lenders, including car-loan and mortgage lenders.