Will FlexScore Beat FICO Credit Scores?
Today the FICO credit score is the industry leading financial metric and is used by creditors and employers to judge your creditworthiness. FlexScore is a new financial scoring tool. It aims to improve traditional credit scoring models by adding assets, goals and financial planning into account.
According to the creators of FlexScore, the tool will help people to answer the main questions: “How am I doing?” and “How do I improve my current financial situation?” The creators hope that this game-like tool will encourage individuals to be more mindful, conscious and connected to their finances.
FlexScore shows that you have financial strength and wherewithal to continue to pay your bills, while FICO score demonstrate your desire to pay your bills. FlexScore is much more complete and complex and is more a financial success score than a credit score.
So what is FlexScore? A consumer FlexScore is a number which ranges from 0 to 1,000 points based on 14 different scoring categories. (A FICO credit score has a range of 300 to 850.)
The first 500 points deal with financial preparation and include these criteria: investments, goal-setting, protection planning, estate planning, debt optimization, tax planning and tax flow. The last 500 points account for the following criteria: asset diversification, asset liquidity, debt-to-networth ratio, monthly housing cost ratio, debt ratio and goal progress.
When your FlexScor hits 1,000-point that will mean you are financially stable and independent, and ready to retire.
FlexScore also offers suggestions and pieces of advice on your financial improvement. There are videos in the tool’s learning center, recommended reading and financial glossary. The peer ranking system, where you can compare FlexScors, may drive you to a competition to attain a higher FlexScore than others or to flaunt your 1,000-point score.
The gamification element could help the tool to get more people to use FlexScore and increase its recognition within the financial industry. However, the creators of FlexScore do not aim to replace the FICO score, but to enhance the FICO score. They want FlexScore to be adopted by the banks and used together with the FICO score.