How Experian Boost Can Help Your Credit

happy young couple finding out about Experian Boost

Right after the news of the UltraFICO new credit scoring model, Experian announced a new service called Experian Boost. Experian, one of the three large credit agencies, is launching it this year and claims Experian Boost can help increase your credit score.

Experian Boost empowers you to add your online utility and cellphone payments to your Experian credit report. This additional data is factored into your FICO credit score calculation, giving it a boost. Experian Boost may benefit many people who have a low credit score or have little credit history. Additionally, lenders may benefit by being able to offer their loans to a broader audience of people.

How is Experian Boost different than UltraFICO?

It appears that both these scoring models are similar in that they potentially could help your credit score. But there are differences. UltraFICO alters your score by taking into consideration your checking and savings account information. In contrast, Experian Boost alters your actual Experian credit file by adding recurring utility and cell phone bill payments. Therefore, your score is raised. With Experian Boost, it is the first time you, the consumer, can choose to add something to your credit report.

How does Experian Boost work?

Traditionally, your credit report includes financial information gained from loans and lines of credit such as credit cards, student loans and auto loans. Utility and cell phone information have not been part of your credit report in the past because of privacy concerns. Recently, some are lobbying the U.S. government to consider it. Regardless of what comes of this bill (Credit Access and Inclusion Act of 2017), Experian is utilizing this momentum and offering this credit service. Should you elect to use Experian Boost, your bank accounts are scanned for payments made to utility providers. This data is then added to your Experian credit report and used in your score calculation.

Important to know is that missed payments are not considered. Experian Boost cannot hurt your score directly. If you fall behind for three consecutive months, this data is no longer included in your report and your score is recalculated.

Calculator and papers finding out Experian Boost

Will Experian Boost help your credit?

Since Experian Boost only affects your Experian credit report, using it will only help in the case where lenders use Experian. Not all lenders use scores impacted by Experian Boost.

Keep in mind, when you apply for a new credit card or loan, the lender checks your creditworthiness by either:

  1. Viewing your credit score.*
  2. Reviewing your credit report from any or all of the three major credit agencies (Experian, Equifax and TransUnion).

*Understand that there are different versions of your credit scores, such as FICO 8 (the most widely used formulation). Scoring algorithms can be based on one or more credit reports.

TIP: If you are applying for a specific card or loan, ask the lender which credit score or report they use to base your creditworthiness. If it’s Experian, you may benefit by opting into Experian Boost.

Experian Boost claims it will help consumers who don’t have a credit card or those who are new to establishing credit. So if you are just starting out as a young adult, your credit history is short. Choosing to add some recurring payments such as utility or cellphone bills would help add some positive data to your credit file. Your payment history shows creditors that you are financially responsible.

Experian Boost also declares that it can help people that have a low credit score. 75% of consumers with a score of under 680 will see an improvement in the credit score.

What are the negatives?

Potential for too much debt:

Man looking at many bills with too much debt

Similar to the concerns with UltraFICO, the Experian Boost offering has a potential of if longterm issues if subprime borrowers get access to more credit. Make sure if you utilize this service, you don’t borrow more than you can handle.

Privacy Concerns:

Data Breach picture

Opting in to Experian Boost requires you to give Experian access to your bank account information. Once signed up, your bank account will be linked. While Experian is reputable, it certainly is a risk for potential data breaches. We all remember Equifax’s incident in 2017 so it does happen.

How do I sign up?

You can sign up for Experian Boost on there website. You’ll be required to sign up for an Experian membership but it is free to do so.

In Conclusion

We certainly don’t know everything about Experian Boost because it’s so new. Certainly, it will have its pros and cons and we’ll learn as time goes on. If you think you might be interested in it, be make sure you are paying your utility and cellphone bills on time. Maintain good payment habits now. You’ll be in a good position should you want to utilize Experian Boost in the future.