MADISON, Wis. (7/18/13)--The Filene Research Institute launched a study to investigate the establishment and trajectory of a credit score--starting from an initial FICO score of zero.
The Great Credit Race will follow the use of a Visa credit card by 20 individuals who have no established FICO or a zero score for six months to ascertain key variables that affect the score's opening growth.
As part of Filene's i3 program, two member credit unions--Del Norte CU, Los Alamos, N.M., and Dupaco Community CU, Dubuque, Iowa--will pilot the study in an effort to crack the code on how credit scores experience an uptick from score inception.
"The great conundrum is that it's really hard to get credit if you have no credit score," said George Hofheimer, Filene's chief research and innovation officer. Since considerable weight is put on revolving credit for credit score determination, the Great Credit Race has made using a credit card the crux of the study.
"Unveiling some of the initial triggers, both positive and negative, on a credit score could be groundbreaking for consumers who struggle with home and car ownership, rental ability, and even job acquisition," Hofheimer added.
"The Filene study is quite unique in its perspective," said Denise Wymore, Del Norte vice president of member loyalty. "We know what types of behaviors raise or lower scores on established credit scores, but it's really a mystery as to what behaviors actually help build a score from the ground up."
The study also will provide insights into more effective ways of helping consumers understand money, according to David Klavitter, Dupaco senior vice president of marketing. "It's the role of credit unions to improve our members' overall financial well-being," he said. "Better financial education is critical."
Participants in the study will receive a Visa credit card with a $500 limit and are told they must make monthly payments in a timely manner and cannot exceed the set limit. On the last day of each month, each credit union will do a soft pull of the credit score via TransUnion. On the 180th day of the race, the individual with the highest score will be deemed the winner and receive $500.
"The insight gleaned from this study may give consumers a real step up in the credit game, helping them establish habits that will open the doors to better opportunities and lives," said Hofheimer.
Other i3 credit unions contributing to the project include Elevations CU, Boulder, Colo.; Leaders CU, Jackson, Tenn.; Vancity CU, Vancouver, B.C.; and Xceed Financial CU, El Segundo, Calif. Currency Marketing of Chilliwack, B.C., is providing marketing support and guidance.