FICO upgrades its cash-flow-powered score with real-time data

• Key insight: FICO's partnership with Plaid shifts credit scoring more toward real-time cash-flow signals.
• Expert quote: Cornerstone Advisors' Ron Shevlin says real‑time cash flow can provide a more up‑to‑date credit view of borrowers.
• Forward look: Expect lenders to run cash-flow‑enhanced scores alongside legacy credit scores, requiring more consented data access.
  Source: Bullet points generated with AI with editorial review

FICO is bringing a real-time cash-flow data upgrade to its UltraFICO score through a partnership with the data aggregator Plaid. The credit score reporting company is releasing the upgrade as credit bureaus and fintech companies pivot toward including cash-flow underwriting in credit decisions for borrowers. 

The enhanced UltraFICO score solution uses Plaid's systems to accept and analyze real-time cash-flow data, or information about the money moving in and out of a consumer's financial accounts. Older versions of the UltraFICO score are calculated with a snapshot of several months' worth of historical cash-flow data at a time.

Cornerstone Advisors Chief Research Officer Ron Shevlin told American Banker that the UltraFICO score upgrade could give lenders a "more up-to-date view of a borrower's creditworthiness."

"Before the Plaid deal the UltraFICO score accessed checking and savings account data, such as account age and balances, to augment traditional credit‑file data," he said. "With Plaid, the UltraFICO score will use real‑time or near‑real‑time cash‑flow data, such as inflow, outflow and account activity, to enhance the score."

Cash-flow based underwriting is an older method of loan underwriting that is recently gaining traction again, especially as digital lending brings more borrowers into the market with a lower level of credit history than is typically used for vetting. 

Experian announced a new combined credit and cash-flow score last week. The consumer-side credit-building fintech Bloom Credit also works with all three credit bureaus, particularly TransUnion for its Bloom+ product, to help individuals boost their credit history with cash-flow information.

"If a lender's underwriting, decisioning and vendor environment is heavily FICO‑centric, the FICO plus Plaid route will be a quicker rollout and lower friction," Shevlin said. "If a lender is looking to extend credit access, and many are these days, Experian's broader model may offer higher lift, but with more complexity. Many lenders will likely adopt both scores or use them in parallel."

Shevlin noted that if lenders opt to use the Plaid‑enhanced UltraFICO score, data connectivity and permission frameworks would need to be built into their decision flows, as banks and lenders need consumer permission to access sensitive financial data.

"If they aren't, the lift may be limited," he said.

FICO's credit scoring models are used by all three major U.S. credit bureaus and most banks and lenders. According to the company, 90% of top U.S. lenders use FICO scores to determine whether to offer a loan to a potential borrower.

The new UltraFICO score upgrade will offer lenders flexibility to use a cash-flow model with the traditional FICO score irrespective of what channel they use. It is also aligned to the traditional flagship FICO score to enable cash-flow adoption without introducing lengthy testing or added risk, according to the company.

"This partnership represents nearly a year of strategic work to address what the market has been demanding, a broader perspective on consumer credit readiness," said Julie May, vice president and general manager of B2B Scores at FICO. "By bringing together FICO's trusted credit score intelligence with Plaid's cash-flow data, we're creating the foundation for more comprehensive lending decisions."

Plaid, a fintech that facilitates data sharing between banks and other financial companies, is connected to over 12,000 financial institutions and assists approximately half of American adults in sharing their bank account data online, according to the company. 

FICO initially released its UltraFICO score product in 2018 as a partnership with the data fintech Finicity, which has since been acquired by MasterCard. The new version of the UltraFICO score will be offered to lenders through Plaid Check's consumer report product. The original version of the UltraFICO score is still accessible to lenders via Experian, according to a company representative.

"High-quality cash flow data is becoming essential for lenders who want a more comprehensive view of a consumer's financial picture," said Adam Yoxtheimer, head of partnerships at Plaid. "By combining Plaid's real-time connectivity and intelligence with FICO in this next-generation credit score, we are helping lenders make more confident, inclusive credit decisions through a simple and scalable solution."

The three main credit bureaus, Experian, Equifax and TransUnion, also developed their own thin-file and trend data-based scoring model back in 2006 called VantageScore. VantageScore announced that it would include opt-in aggregated bank account data in May 2024.

Other fintechs that use cash-flow data to evaluate creditworthiness include TomoCredit, Nova Credit and Harvest Platforms (acquired by Acorns in 2021).