Experian Boost – Add it to your toolbox if you’re rebuilding credit.
Experian Boost can offer a real-time boost to a consumers credit score based on on-time recurring bill payments. The details found in a consumer’s credit report are the tools used by lenders to either approve, or deny, a line of credit. It gives them a fair idea about the applicant’s ability to repay the credit being extended. Now, that really sounds like we’ve been reduced to numbers. Unfortunately, it’s also a reality. While the credit scoring and reporting system may not be perfect, it does provide the most accurate preview of a borrower’s integrity.
That’s not to say that borrowers with troubled pasts won’t be responsible borrowers now or in the future. A credit report allows lenders to see an individual’s past and present credit data to make the most informed and educated decision they can. Not only are they looking at the numbers, they’re also looking at for effort.
Why not start with an anecdote? In my younger days, I financed a Mercedes Benz. I could just barely afford the payments, let alone the insurance with my freelance income. But, I was determined to make it work. I even picked up extra work to help curb my bloated budget. Eight months later the repo man waved gleefully as he drove away from my house, my Mercedes in tow.
This was a very irresponsible decision on my part to purchase outside of my means. While I was angry at the bank for even approving me, as the numbers predicted this, it was my fault.
So now I have a vehicle repossession on my credit. This is on top of some other questionable credit choices still lingering on my report. A year passes focused on diligent bill paying, credit card management, and shrinking my debt to income ratio. I financed a brand new vehicle (within my means this time) with a 5.5% interest rate. Not bad for someone who just a year ago boasted a 550 credit score and a fresh vehicle repossession.
Credit is not a constant.
The purpose of this story is to show you that credit fluctuates wildly. And, while you may be a “number” to some lenders, you have full control over what that number is, and how it’s viewed. There are steps you can take on any budget to rebuild your credit. When lenders look at your credit report, in addition to numbers, they look for “effort”. In my case, my credit score hadn’t risen significantly, but lenders saw my efforts clearly reflected on the last year of my report.
And, this is exactly why I love the idea of Experian Boost. Even during my most difficult times with credit, I always paid my household bills on time. In fact, most were auto-drafted straight from my account. The idea that those consistent on-time payments could be reflected in my credit score was very exciting to me.
I’m getting ahead of myself, first things first…
What is Experian boost?
Experian Boost is a brand-new service offered by, you guessed it, Experian! By the way, this is in no way a paid endorsement, we just genuinely like this product here at CFF.
Let’s break it down. Experian Boost allows consumers to “connect” their bank account (securely, of course) to their Experian account. Experian will scan your account for common recurring payments not traditionally found on a credit report.
Examples of these are utility payments like electricity, gas or water. Then, it will add on-time payments of these accounts to your credit report. More on-time payments added to your report = a quick and instant boost to your credit score. Even better, they only report the on-time payments.
The addition of this data to your report can boost either your FICO scores, VantageScore credit scores, or both.
Who will benefit from Experian Boost?
Well, anyone for the most part. This is a tool that is going to help consumers rebuilding their credit, starting new credit, or those simply looking to add a few points to their scores.
Rebuilding credit is A big part of our mission here at Consumer First. Settlement programs can reduce your credit temporarily, and any product that helps consumers recover that score deserves attention.
It should be noted, we’re not talking massive increases here, but everything helps! Currently, 62% of consumers have received increases to their scores upon signing up. The average of these increases was 14 points. That’s a significant increase to person rebuilding or starting their credit.
How do you sign up for Boost?
Signing up for Experian Boost requires first creating an Experian account. This in itself is a great tool to monitor your credit and debt accounts. From there, you’ll need to connect your bank account. It should be noted again, this process is completely secure and quite easy.
Experian will scan your bank transactions for recurring payments, most typically utility payments – It will then aggregate this data and add it to the on-time payment section of your credit report, thus, instantly boosting your credit score.
That’s it. Once in place, Boost will continue to report on the on-time payments for these accounts, and new ones added in the future.
Is Experian Boost beneficial?
In short, yes. At this point it seems to be quite beneficial to consumers. This tool is suited to help individuals who have credit scores between 580 and 699, per Experian. But, most people wouldn’t mind a little boost to an already good score if they qualify. Using this tool, 14% of customers moved to the fair category (credit sores 580-699) from poor credit category i.e. the consumers with a credit score below 579.
Managing Your Expectations.
While Experian offers you some control over your credit report, it’s vital to maintain realistic expectations. First, understand that Experian Boost will only impact your Experian-based credit scores and it will not have any effect on credit scores based on Equifax or TransUnion data.
Also, adding a few positive utility accounts will not eliminate any negative scores from your Experian credit report. Any credit score boost is a good thing, but if you plan to opt for Experian Boost, treat it as one component of your credit improvement plan.
Will Experian Boost affect credit in a real-world way?
Experian offers a smart way to raise your credit score in real time. Since consumers with low credit scores usually get locked with higher interest rates when they acquire access to credit, Experian Boost’s impact has great potential.
Many lenders looking at auto loans, for example, have a minimum score for approval. Imagine if a 10 to 14 point boost to your score put you in their approval range? Of course, this is assuming the lender is looking at Experian credit data in favor of the other two.
The caveat to Experian Boost?
Users’ results might differ in the real-world. This platform calculates the credit score based on the FICO 8 model, but a credit card lender may use a different FICO score – or another, completely different type of score – to make their lending decision. We’re not seeing this as a major concern. Again, any improvement to your score across one or all of the three bureaus is a positive.
Security is always a concern. Experian is using the latest in encryption technology to keep their users safe, but with all digital transactions come a certain level of risk. It appears Experian has done their best to make this risk quite minimal.
The effects of a low credit score.
According to Credit Builders Alliance, a customer with a subprime credit score will typically pay around $200,000 more over his lifetime than a consumer with a good credit score. For instance, if your FICO score is 720, you will have to pay $4,020 less for a five-year, $10,000 auto loan than someone with a 500 score.
It’s important to use all tools at our disposal to both manage, and improve our credit scores. Here at CFF, we’re fans of this new product and look forward to sharing it with our own clients.
Your partner in debt relief,
Consumer First Financial