Proposed FICO Change Could Make 15 Million Americans Creditworthy
Millions of Americans that are currently unable to qualify for loans because of lack of credit history could become eligible soon because of a proposed change to how credit scores are calculated. Fair Isaac Corp., more commonly known as FICO, is expected to announce a new system as early as this week. The as-yet-unnamed credit system would include factors such as payments made to utility, mobile and cable providers that have not been used in the past. The company says that some 53 million Americans do not currently have FICO scores because of insufficient data. Of those, the firm thinks it could immediately provide scores for about 15 million under the new system. Furthermore, the company estimates that about 5 million would have a score above 620 with the new criteria, which many lenders use as a minimum qualification for loans.
In addition to creating scores for Americans without credit, FICO’s proposed change would also make it easier for younger Americans without credit history to qualify for a credit card, car loan or mortgage. Under the current system, those with no credit history are often unable to build credit because they get turned down for lack of credit in their past. Under the new system, those who stay current on utility bills would be scored based on those factors, thus allowing them to qualify for credit products that can help further build their score. FICO has been testing the new system for several months, and is optimistic about the early results. While no date has been announced for a nationwide launch of the new system, insiders expect it to be rolled out as early as next week.