SAN ANTONIO - Getting your first credit card can be a real challenge if you have no credit history because banks are often reluctant to risk giving you credit. Now, a new type of credit scoring system called UltraFICO may help those just starting out get their first credit card and help people with lower scores boost them.
Jake Weintraub is careful with his money, but so far, his applications to get his first card have gone nowhere.
“Getting rejected for credit cards is definitely a little bit frustrating, especially considering that there’s nothing else I can do about it,” Weintraub said.
He wants to establish credit history so that one day he can rent or buy a home and a car.
To get a credit card, you need a credit score. FICO is the main system that banks have long used and bases its score on how well people have handled loans in the past. But what if you’ve never taken out a loan? The UltraFICO system, which will debut this summer, won’t depend on loan history.
“UltraFICO is going to base its score on how people use traditional savings and checking accounts. Those kinds of accounts are easy to set up with just a cash deposit, so they can be a good choice for people with a weak credit history, or none at all, to build up their credit,” said Tobie Stanger, with Consumer Reports.
Consumers can choose to opt in to UltraFICO, which would look at withdrawals and deposits and bill-paying history.
Consumer Reports cautions that consumers will have to share confidential information about their bank accounts and said it’s still unclear whether lenders will buy into the UltraFICO score.
“We have another concern, and that is that making credit easier to get may cause some people to get in over their heads, and then they may not be able to pay back their debt,” Stanger said.
If you already have strong credit and well-established credit histories, Consumer Reports said, the UltraFICO scoring system isn’t necessary and that you should stick with the traditional FICO system.
According to FICO, the people who stand to benefit most from UltraFICO are those with scores in the low- to mid-600s. To get a boost from the new scoring system, consumers would need to keep about $400 in their bank account and not overdraw them.
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