Having a positive credit history can be the key to unlocking many financial opportunities in life. From renting an apartment, to getting an auto loan, or securing credit products with lower interest rates and fees – a limited credit file or lower credit scores can prevent people from accessing many of the things we want in life. Thankfully, there are new tools available to help people take control of their credit in ways that weren’t possible until now. We recently had the opportunity to speak with Rod Griffin, senior director of consumer education and advocacy from Experian, to learn about Experian Boost – a new tool that is giving people the opportunity to instantly improve their credit scores.
Here’s what we learned about this free service from Experian:
What is Experian Boost and how does it work?
Experian Boost is a free, first-of-its-kind tool that allows consumers to add positive cell phone, internet, cable and utility payments to their Experian credit report for an opportunity to instantly improve their credit scores. This is the first-time consumers can add positive information directly to their credit report.
To start the process, consumers need to visit www.Experian.com/boost to enroll in a free Experian membership. From there, they’ll be asked to sign in to the online checking or savings accounts they use to pay their monthly telecom and utility payments. With the consumer’s permission, Experian Boost will securely connect to their accounts and identify their positive monthly payments. Once a consumer verifies the information is correct, the positive payment history is added to their Experian credit report and an updated credit score is shared immediately. The whole process takes about five minutes.
Since launching in March of 2019, more than 2.4 million consumers have seen their credit scores improve with Experian Boost. More than 60% of consumers see their credit scores go up with an average increase of 13 points. With Experian Boost, consumers are in complete control. They can decide when to contribute their positive telecom and utility payments to their Experian credit report and if they’d like the information removed.
Who can benefit from Experian Boost?
On average, we see credit scores improve for two out of three people who use Experian Boost. The service is especially helpful for people with limited credit histories or thin credit files. Approximately 86 percent of thin file consumers who use Experian Boost see an instant FICO Score increase, averaging 19 points. By using Experian Boost, consumers with thin credit files or limited credit histories can build their history of on-time payments. In turn, this may help lender’s gain a more complete view of their creditworthiness, which may help the consumer gain access to fair and affordable credit.
In addition, Experian Boost users who had a poor FICO Score see an average increase of 20 points. Of those who experience an increase after using Experian Boost, 12 percent move up a credit tier and 24 percent of consumers in a “poor” credit tier move to a “fair” tier. This can be a significant improvement to help people secure better rates and terms on credit products.
Traditionally, how is your credit score impacted by utility, phone and cable TV bills?
In the past, utility and telecom information was not routinely reported. In fact, state regulatory agencies often prohibited reporting positive information. Negative information could appear, hurting consumers’ credit scores, but positive information wasn’t added to help them. Experian Boost changes that.
With a consumer’s permission, Experian will capture the positive utility or cell phone payments specified by the consumer from their bank account each month and add it as an account to their credit history. Because the payments are added directly to their Experian credit report, any scoring system that the information feeds into will be able to use it in the score calculation.
How do lenders interact with Experian Boost?
When a consumer connects to Experian Boost, they contribute their on-time telecom and utility payment information directly to their Experian credit file. There is no additional work required by a lender to view a consumer’s boosted score or the applicant’s credit file. Experian Boost impacts the credit scores most commonly used by lenders today, including FICO Score 8 and 9, VantageScore 3 and 4 and many others. New versions of the FICO Score will consume Experian Boost information the same way current score models do today.
Aside from Experian Boost, what are other ways to improve credit scores?
Think of your credit scores like a report card that you might review at the end of a school term, but instead of letter grades, your activity ends up within a scoring range. Having a “good” credit score, or in most cases a score of 700 or greater, can unlock many opportunities including lower interest rates on loans, access to better credit cards and smaller down payments. Additionally, high credit scores could mean lower security deposits on rentals and utilities and lower insurance rates.
So, how can you make sure you have a positive report card or credit scores? There’s really no secret, and consistency is key. Pay your bills on time, every time and keep your balances low. These are the two most heavily weighed factors in credit scoring. If you have any past due accounts, you should bring those accounts current and make all payments on time going forward. Your utilization rate, or you balance-to-limit-ratio, is calculated by taking the total of all your credit card balances and dividing that number by the total of all your credit card limits. The lower your utilization rate, the better for your credit scores. People with the best credit scores have utilization rates of less than 10%, so decreasing your credit card balances can have a positive impact on your credit scores. Ideally, you should pay your credit card balances off in full each month.
What about credit reports?
If you are working to improve your credit, you may want to check your report and scores more often. When you check your credit score, should receive information about which factors are affecting your scores the most. The most common include high balances or utilization rates, late payments or length of credit history. Use these factors to establish a strategy for improving your credit. Remember, credit reports and scores go together. Once you understand what is affecting your score, you can take the necessary steps to improve your credit. There aren’t any real secrets to boosting your scores. Improving your credit scores takes time, but the sooner you address the issues that might be dragging them down, the faster your credit scores will go up.
Guest post contributed by Rod Griffin & Amanda Garofalo of Experian.