FICO, the standard for measuring consumer credit risk, is instituting a new scoring formula in an effort to help high-risk consumers access credit.
The new credit scoring formula will take into account how often someone changes addresses and payment history for items such as cable, cellphone, electric and gas, and other utilities. Payment history isn’t typically looked at when evaluating credit and frequent address changes can hurt a consumer’s score.
FICO is working with 10 credit card issuers to implement the new scoring method and expects to make it available on a national scale by the end of 2015.
The new scoring method will allow up to 53 million consumers access to credit that they previously could not qualify for under the traditional method, and 15 million are already eligible to be scored with the new system. These previously poor-scoring consumers faced difficulty acquiring base level needs including securing housing, cellphones, cars and utilities, since businesses rely on favorable credit scores for making transactions.
The new system gives responsible consumers who may have had trouble in the past, to establish trustworthiness and good credit.