Expansion Scores

People who are relatively new to credit can experience difficulty obtaining financing or getting the best interest rates because they lack an established credit history. Approximately one-fourth of all adult U.S. consumers, roughly 50 million individuals, either lack credit reports entirely or have credit reports with too little information to make a good prediction of credit risk. This group includes immigrants, young adults, people who are recently divorced or widowed, and other groups that typically don't use credit very often.

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These consumers have often found it difficult to obtain financing for their first credit card, auto loan or home mortgage. One reason for this is that credit bureaus only add consumers to their database when a creditor, collection agency or other business sends it credit-related information involving that consumer. Consumers can be missing from credit bureau files if they haven't opened a credit account yet or have insufficient credit activity. To assist these consumers, Fair Isaac and Company has developed a new assessment called the FICO Expansion score.

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The purpose of this new score is to predict the credit risk of consumers who don't have a traditional FICO score. The Expansion score is a credit risk score based upon non-traditional consumer credit data (in other words, not based on data from the major national credit bureaus, TransUnion, Equifax and Experian). Examples of such data include deposit account records, payday loan cashing, and purchase payment plan performance. Because it uses alternative data sources, the Expansion score helps lenders extend credit to consumers who are typically excluded from the traditional credit-granting process.

As with traditional FICO scores, the expansion scores range from 300 to 850. The same logic applies, meaning that the higher the score a consumer earns, the less of a risk they are to lenders. As with traditional credit scores, consumers turned down for credit based on the new scores will be able to get a copy of their credit report, which they can challenge or take steps to improve.