New Credit Scoring System Accounts for Cash Advance Payments
By J.J. CameronPayday Loan Writer
Out with the old, in with the new: New forms of credit scoring use your payment record on utility bills, rental units and payday loans to assess your ability to repay loans.
Approximately 50 million individuals are locked out of access to credit because they lack the credit history needed to generate a decent FICO score. Fair Isaac Corp., the company that pioneered this form of credit scoring, however, is now offering a new product: the FICO Expansion score.
One of the thing it will take into account? Your faxless payday loan payment history.
Along with other players in this rapidly expanding market, Fair Isaac hopes to attract lenders eager to expand their customer base.
"One of the problems for people who don't have good FICO scores is the collection of enough positive data to make the score an effective predictive tool," says Tena Friery, research director of the Privacy Rights Clearinghouse, a California-based consumer advocacy group. "This score has the potential to give people the chance to own a home who otherwise wouldn't be able to get into the market."
How do any sort of fast payday loans relate to the FICO Expansion score? Drawing on alternative credit data such as bank account records, cash advance 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.
"In developing the Expansion score, Fair Isaac analyzed anonymous alternative credit data to statistically determine what factors are most predictive of future credit performance," said Lisa Nelson, vice president of business operations for Fair Isaac in an appearance before the House Financial Services Committee in May 2006.
The new system excludes factors considered less than pertinent to one's trustworthiness as a consumer. But how quickly you pay back a cash loan is certainly indicative of your financial future and is taken into consideration.
