Image of a tablet displaying a FICO expansion score of 811.

If you're having difficulty obtaining financing because you simply don't have an established credit history, Fair Isaac and Company (FICO) has developed a new score to help creditors predict the credit risk of consumers who haven't yet established a credit history.

No Credit? No Problem!

Credit scores are nothing new to consumers; however, recent changes are making it easier for those who find it difficult to receive financing because of insufficient length or lack of a credit history. A credit score, or risk score, is based on information contained in your credit report, and tells lenders how likely you are to handle debt responsibly. 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.

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 agency credit-related information involving that consumer. Consumers can be missing from credit bureau files if the consumers have not yet opened a credit account or have insufficient credit activity. To assist these consumers, Fair Isaac and Company have developed their FICO Expansion score.

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, pay day 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.

Unlike traditional FICO scores that range from 300 to 850, these new Expansion scores will range from 150 to 950. The same logic behind traditional FICO scores applies, meaning that the higher the score a consumer earns, the less of a risk they are to lend to. 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.

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