Credit score is one of the most essential things when it comes to loan application and it is one of the major reasons of numerous refusals. At the present moment new credit score system is considered; it is likely to be based not solely on credit card and bank information but include some alterative data such as cell-phone bills and cable information. It is believed, that additional information is able to help create a more adequate credit score picture and also provide borrowers with a chance for a credit.
At the present moment TransUnion is developing an alternative system that will produce more options of credit approval to borrowers who initially were considered bad credit.
The system is going to be called CreditVision Link and it is a combination of an old traditional credit score system with a new alternative one, the latter is implemented with a better and thorough analysis of all credit data. In accordance with this system 95% of all the U.S. off-age citizens are expected to be assigned with a credit score.
The new score systems are going to use many types of information instead of several traditional ones. In this respect creditworthiness of a person is going to be estimated not only from a point of view of a bank debt repayments and credit card information but it will also be based on other data. Taking into consideration the fact that about 8% of people in America are considered “bad credit” borrowers, and 11% are “credit invisible”, the new system is designed to make a change.
FICO as well as other traditional scores are based on the following information: bank and credit card company info, credit bureaus’ reports as well. In the situation when a person has never had a credit card or for some other reason lack credit score, their chances for dealing with lenders are non-existent.
New credit system is a much fairer option, as it includes many other aspects apart from credit card information and bases its results on many aspects instead of few. FICO Score XD, a new score, is a product of Equifax credit bureau. The system includes cable and cell-phone bills data as well as property records and some other things (for instance, even the frequency of address change, activity and checking account history, and in some cases – payday loan history) . The system proved effective upon testing – it allowed granting scores to more than half applicants who have been considered unqualified before.
The new score, thus, represents a combination of a traditional score system and alternative analysis options, which makes it more effective in all the ways to borrowers. It is also a more adequate and trustworthy option for risk assessment.
The system is still in the mode of testing and it is not yet clear whether it is going to be implemented and, if yes, then, when. There are many pros as well as cons; is has got drawbacks and is able to affect negatively some people as the result of some information usage. That is why FICO XD is not yet brought into open access” and the traditional score system is still in place so far.