FICO offers ‘alternative’ credit score

NEW YORK – People struggling with a bad credit score, or lack of one, could benefit from a program rolling out in the next few months aimed at making it easier to get a Visa or MasterCard.

The company behind the widely-used FICO credit score announced Thursday a pilot program to help millions of Americans get easier access to credit, based on their record of paying utility bills, instead of their history of loan repayments.

The potential reach of the program is huge. An estimated 53 million Americans, or a quarter of the U.S. adult population, don’t have FICO scores created by the company Fair Isaac. Roughly 90 percent of all lending decisions – credit card applications and auto loans, among others – are based on that score. Banks would normally deny credit to anyone without one, or they could charge them significantly higher interest rates, because the applicants would be considered risky.

These consumers are often the young, without an established credit history, or immigrants, who are new to the U.S.

The program took two years to develop and came from Fair Isaac.

Under the program, Fair Isaac, working with LexisNexis and credit agency Equifax, will create a payment history profile from a person’s utility bills and public property records. FICO would use that pooled data to determine an “alternative” credit score when a person with a poor credit history, or none at all, applies for a credit card.

The scores are being made available to the 12 largest credit card issuers, but Fair Isaac did not say which banks will be participating in the program.

The unnamed program is not designed to replace the traditional FICO score and will only be available to credit card issuers initially.

“Most people have a cellphone, gas or electric bill, and the size of those payments each month can be sizeable,” said Jason Flemish, vice president of consumer risk and credit products at Equifax. “So let’s give them the opportunity to benefit from paying those bills on time.”