Boosting your credit score often requires months of responsible financial behavior. But a new tool from Experian – one of the three major credit bureaus – enables you to instantly add utility and cellphone payments to your credit report, potentially increasingyour credit score and helping you pay less to borrow.
The platform, called Experian Boost, becomes available in January for those on the credit bureau’s early access listand will roll out to everyone in the following months, the company said Tuesday.
The tool is the first of its kind, according to Experian, and provides a way for people to immediately shape their creditworthiness. Typically, it can take months of makingon-time payments to meaningfully improve a credit score, while one slip-up can do instantaneous damage.
“We estimate about 100 million consumers are excluded from mainstream credit and are paying more to borrow,” says Brian Cassin, Experian’s global CEO. “This gives people an opportunity to change that, and we believe many will benefit from a higher credit score, better access to financial products, often at a cheaper cost.”
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How it works
You first give Experian permission to access your online bank accounts, so it can identify utility and telecom payments and add them to your credit history. You confirm the data is correct and then it’s added. A new credit score is instantly generated.
Experian Boost works with the most commonly used credit scores by lenders: FICO 8, FICO 9, VantageScore 3 and VantageScore 4. But if a lender relies on a TransUnion or Equifax credit report for its application process, the tool won’t help your approval chances.
Experian is partnering with Finicity, a third-party company that facilitates the data transfer from your bank account to Experian’s credit report repository.
Who will benefit?
Experian expects that two-thirds of consumers will see an improvement. Those with so-called think credit histories – less than five accounts – and FICO credit scores between 580 and 669 will benefit the most, Experian said.
Ten percent of people with thin files who previously didn’t have enough information in their credit file will have a score. Fourteen percent of those with subprime scores of 579 or lower moved into the 620 to 679 near-prime range, enough to get better credit terms.
A subprime credit score costs the average person about $200,000more over the course of their life, according to Credit Builders Alliance.
“They won’t be approved for the best rate,” said John Ulzheimer, a credit expert who formerly worked at Equifax and FICO. “But they are basically turning someone who is a denial (for credit)into a marginal approval.”
Real-life example
Jeff Softley, chief marketing officer of Experian consumer products, received a 28-point boost after using the platform. Before, he only had four accounts in his credit historyhistory – “an incomplete credit profile” as he called it – but was able to add another six accounts including his water, phone and electric bill payments.
“It’s a significant gain,” he said. “It allowed me to look at a different type of credit cards that I wouldn’t (otherwise)qualify for.”
More access to credit
The Experian Boost platform comes as lenders, the credit scoring industry, consumer advocates and even the Consumer Financial Protection Bureau are exploring new ways to expand access to credit, especially to people who are on the cusp of qualifying or who may have no traditional credit history but are financially responsible.
“This is like a credit score arms race,” Ulzheimer said. “It’s not like there’s a million prime consumers hiding under a rock somewhere.”
The CFPB last year estimated that 26 million Americans have no credit history at Experian, Equifax or TransUnion. Another 19 million people have credit histories with only inactive accounts that don’t provide enough recent credit payment data to generate a score.
In October, FICO, the developer of the most widely used credit score, announced a new score debuting next year that considers how you manage your checking, savings and money market accounts in addition to how you pay back your credit cards and loans.
Experian also plans to broaden the types of accounts you can add to your credit file beyond just utility and telecom payments in the months following Experian Boost’s launch.
“We have made it a focal point to put consumers at the heart of what we do,” Cassin said, “and increase financial inclusion.”
