New FICO Score Uses Cash Flow Data to Expand Credit Access

FICO has launched UltraFICO Score, a FICO score that uses consumer-permissioned cash flow data from Plaid. FICO says its scores are used by 90% of top U.S. lenders. 

The UltraFICO Score utilizes traditional credit data and banking data from Plaid’s network of 12,000 financial institutions. This banking data includes cash flow, account balances and  stability, plus consumer spending behavior.

The UltraFICO Score results in better risk assessment without lenders having to overhaul existing systems, according to a press release from FICO.

Julie May, Vice President and General Manager of B2B Scores at FICO, said UltraFICO Score uses a format that lenders already understand and the same credit score scale they already use.

Keeping Up With Consumers’ Complex Financial Lives

Adam Yoxtheimer, Head of Partnerships at Plaid, said credit scoring needs to be more innovative because consumers are leading more complex financial lives.

“FICO and Plaid are pairing trusted traditional credit scoring with high-quality cash flow data, enabling lenders to get up and running quickly, increase approvals responsibly, and maintain regulatory confidence,” Yoxtheimer said.

And an UltraFICO Score that assesses cash flow data is good news for consumers with positive cash flow behavior. According to FICO, 79% of applicants with non-prime credit and histories of positive account balances see higher credit scores.

Breakthrough in Credit Scoring

Craig Focardi, Principal Analyst at Celent, said the new UltraFICO score is a major breakthrough in credit decisioning analytics because it combines credit bureau data with cash flow data and puts them into a single score. 

“Enabled by open banking, this approach also broadens credit access for thin-file and non-prime consumers, creating a competitive advantage for lenders that move early,” Focardi said.

Progress Since a Pilot Program

The pilot program for UltraFICO Score was rolled out about eight years ago. Since then, there have been advancements in technology surrounding cash flow data.

“Over the last several years, we’ve been seeing a lot of advancements in this area such that the entire consumer permissioning process has become almost entirely instantaneous, seamless, and frictionless,” Can Arkali, Senior Director in Analytics and Scores Development at FICO, told us.

The cash flow data used in an UltraFICO Score would most help consumers with limited credit histories, consumers with blemished credit histories, and consumers who are looking to build or rebuild their credit, Arkali told us. 

There are 49 million adults in the United States with thin credit files or no credit histories so there are a lot of consumers who could potentially be helped if cash flow data is used in a credit score.

Cash Flow Data as an Industry Standard

Will cash flow data become an industry standard in credit scoring?

“I feel like what we’re seeing right now certainly indicates that we may be sort of approaching that inflection point. I think the market certainly has been signaling this demand for quite some time,” Arkali told us.

“And there seems to be a lot of excitement around what cash flow data can really help lenders realize. And that’s really a very, very positive development.”

Privacy Issues with the Sharing of Banking Data

How are FICO and Plaid addressing privacy and consumer trust around bank account data?

“The whole process will be triggered based on the consumer actively permissioning access to their bank account information,” Arkali told us.

“And that was one of the main reasons why we were also very excited about our partnership with Plaid in this process. A consumer will certainly need to explicitly permission access for their bank account information. And that’s going to be done through Plaid’s secure connection process.”