Pay in Cash for Everything and Still Build Credit: How UltraFICO Uses Cash Payments

Tylene Welch  | 

Do you pay cash for everything? Ever been turned down for a lease on an apartment or a credit card because of your low credit score? Traditionally, you could only build credit by using credit (that is, borrowing money), leaving many cash users at a disadvantage. But with the new UltraFICO credit scoring system, you can build credit with cash payments.

Generally speaking, using a debit card or writing a check is the same as paying in cash, because it is money you have already earned and currently have in the bank, rather than borrowing. These are precisely the methods of payment that can build credit under the UltraFICO scoring system.

Cash or Finance?

Benefits of Credit Financing

Some people predominantly use credit or financing, to pay for everything, from everyday items to larger purchases. They might prefer credit cards because they offer more security than cash or debit. It’s easier to dispute charges on a credit card, because technically the money is stolen from the issuer, not you; if a hacker stole your bank account number, the funds would be stolen from your accounts, making them an immediate loss for you. Some credit and charge cards also offer attractive points and travel rewards programs. Credit cards can be a convenient tool as long as you can pay off the balance every month.

Benefits of Cash-Only

But others would argue the benefits of paying for everything in cash. Using cash only can help you maintain a budget and avoid overspending. It is hard to overspend in cash, since you generally must have the funds before you can spend them (overdrafting your checking account is an exception, though there are usually lower limits to how much you can overdraw), while credit allows you to borrow regardless of whether you have the funds to repay the debt immediately. Cash also never costs you anything, while your credit card will charge high interest fees every month if you carry a balance; some credit cards even charge annual fees regardless of your monthly balance.

Does Paying Cash Affect Your Credit Score?

Historically, one of the few reasons you would choose to finance or use credit instead of cash would be to build up your FICO credit score. While cash is usually the better option, many choose to finance large purchases like a car or a home because it can help build credit and avoid using up all your cash at once. As long as you can get a low interest rate, it won’t cost very much to finance a loan.

However, you can pay for things like a home with cash if you wanted to. Now, you can also build your credit score by paying for everything in cash. UltraFICO is a new credit scoring system attempting to make sure people who don’t use financing or credit can still build a credit score. It will allow you to link your bank accounts like checking and savings to report cash payments and build credit without borrowing.

Cash and FICO Credit Scores

Your FICO credit score is used to tell lenders how dependable you are as a borrower. Traditionally, your FICO score is determined by these factors:

  • Payment History
  • Amounts Owed
  • Length of Credit History
  • New Credit
  • Credit Mix

Cash payments were not factored into your credit score. Recently, FICO announced they had formed a new credit scoring system called UltraFICO. The new system doesn’t replace your FICO score but could improve it by up to 20 points if you don’t use credit or financing or haven’t ever been approved for a line of credit.

Cash and UltraFICO Credit Scores

The new UltraFICO credit scoring system hasn’t released yet, so it’s tough to tell who will use it and how effective it will be. We do know that if you have a low to nonexistent FICO credit score, you can opt-in to the UltraFICO system that allows Experian to collect data from your bank accounts and use it to improve your current credit score by up to 20 points. You can choose which checking, savings, and money market accounts are used and which ones are never seen by Experian. To determine your new UltraFICO score, credit bureaus will look for three specific things in your bank account activity:

  • Do you maintain a balance of at least $400?
  • Have you ever overdrafted?
  • Do you pay your bills on time?

You can still build credit even if you pay for everything in cash. If you pay your bills on time, spend less than you make, save money consistently, and never overdraft on your accounts, the UltraFICO credit score could help you get approved for a loan, credit card, or lease.


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Tylene is a freelancer in Boise, Idaho. She's a self-taught personal finance hacker with zero debt. She eats avocado toast for breakfast.

This post was updated November 29, 2018. It was originally published November 29, 2018.