FICO Credit Scores
An estimated 50 million consumers are locked out of access to credit because they lack the credit history needed to generate an acceptable FICO score, but a number of companies, including FICO itself, have created new ways to analyze a consumer's creditworthiness.
Fair Isaac Corp., the company that pioneered this form of credit scoring, produces the FICO and is offering one of the new credit scores, which it calls the FICO Expansion score. Along with other players in this rapidly expanding market, Fair Isaac hopes to attract lenders eager to expand their customer base.
Drawing on alternative credit data such as bank account records, payday loan payment records and installment purchase plans, Fair Isaac produces a credit score that is modeled on the traditional FICO score's 300 to 850 point range.
Pros: These new forms of credit scoring are a wedge into the traditional credit market that many consumers can use to prove to lenders that they are a good credit risk. Many other consumers may be able to access credit through nontraditional scoring methods. These include recent high school or college graduates, divorcees or widows and people with some blemishes on their traditional credit report.
Cons: While many consumers who haven't had access to credit may applaud these new scores, other consumers may rue the day that a lender relied on one of these scores if that credit isn't used wisely. As with traditional credit reports and the traditional FICO score, the newer scores are only as good as the data they are built on. Just as there can be mistakes in your credit report, inaccurate information obtained on your nontraditional payments can negatively impact your ability to get loans.
Source: Bankrate.com
Fair Isaac Corp., the company that pioneered this form of credit scoring, produces the FICO and is offering one of the new credit scores, which it calls the FICO Expansion score. Along with other players in this rapidly expanding market, Fair Isaac hopes to attract lenders eager to expand their customer base.
Drawing on alternative credit data such as bank account records, payday loan payment records and installment purchase plans, Fair Isaac produces a credit score that is modeled on the traditional FICO score's 300 to 850 point range.
Pros: These new forms of credit scoring are a wedge into the traditional credit market that many consumers can use to prove to lenders that they are a good credit risk. Many other consumers may be able to access credit through nontraditional scoring methods. These include recent high school or college graduates, divorcees or widows and people with some blemishes on their traditional credit report.
Cons: While many consumers who haven't had access to credit may applaud these new scores, other consumers may rue the day that a lender relied on one of these scores if that credit isn't used wisely. As with traditional credit reports and the traditional FICO score, the newer scores are only as good as the data they are built on. Just as there can be mistakes in your credit report, inaccurate information obtained on your nontraditional payments can negatively impact your ability to get loans.
Source: Bankrate.com