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Whether you’re just starting to build your credit or you’re working your way out of a bad or middling credit history, making improvements can be a long, tedious process.
But in an economic recession with stricter requirements for loans and credit, many people are unable to access things like balance transfer cards and mortgages, and are limited to high-interest (and even predatory) loans that should be avoided even in good times.
Tools like Experian Boost, TransUnion’s eCredable Lift, and FICO’s UltraFICO Score promise easy and simple ways to get better credit scores. Here’s what you should know before considering whether they make sense for you.
How It Works
Of these new credit-building products, Experian Boost is the most established, following its release in early 2019. It works by increasing your positive payment history, a vital factor in calculating your credit score, by adding recurring, but not traditionally reported, payments to your credit report. These payments include utilities — such as electricity, water, cellphone, internet, and natural gas — and, most recently, even your Netflix payment.
When they evaluate your score to determine your creditworthiness, lenders are really determining how likely you are to pay back the money you borrow from them based on your past behavior.
For someone with few accounts on their credit report, proving that creditworthiness is a bigger challenge; reporting these nontraditional payments is one way to help overcome that challenge.
The Impact of New Scoring Programs Today
Experian isn’t the only company experimenting with nontraditional credit scoring methods.
TransUnion uses a product called eCredable Lift to similarly add 24 months of utility payment history to your credit report by accessing your utility accounts directly instead of your bank account. This program works with your TransUnion FICO Score 8 and VantageScore 3.0, even if you have no credit history at all and costs $19.95 annually.
Beyond the credit bureaus, FICO also recently introduced a new credit scoring model to help pad thin credit profiles. The UltraFICO Score goes beyond just utility payments, accessing banking history such as savings balances, length of account history, frequency of transactions, and more to supplement your credit information. Even if you don’t have enough credit history to generate a traditional FICO Score, you can receive an UltraFICO Score.
Ultimately, it’s a positive trend for these institutions to begin assisting people with little access to traditional credit, says Cristina Livadary, CFP, of Mana Financial Life Design, a financial planning firm in Marina Del Rey, California.
“It’s one of the things that kids are never taught in school,” she says. “Having good credit really determines your access to some of the things that are important to acquire when becoming an adult.”
Your recurring monthly payments already work similarly to credit or loan payments, says Rod Griffin, senior director of public education and advocacy at Experian. “You have a service, you receive it and use it in advance, and then pay for it in the future, just like a loan you get and pay back over time.”
What Experian Boost Won’t Help With
Even if a new scoring program boosts your score on paper, reaping the benefits in practice can get a little more complicated.
Each of the three credit bureaus (Experian, Equifax, and TransUnion) determines your score based on the information found in your credit report with that bureau. Your lender may pull a credit score based on your report with any of these bureaus, or they may pull multiple scores based on all three reports. If your lender chooses a score based on Equifax data, for example, Experian Boost will make no difference. It only benefits your Experian score because it’s only added to your Experian credit report.
The score your lenders sees can also vary based on the model used to calculate the score. FICO and VantageScore, the two most common credit scoring systems, have multiple models available that lenders can choose from, and credit-boosting programs like Experian Boost won’t appear on every model.
FICO 8, FICO 9, VantageScore 3.0, and VantageScore 4.0, the most commonly-used versions of each, do include Experian Boost. Credit Card issuers often use FICO 8 scores, so Experian Boost could increase your odds of getting approved for new cards. But if you were to apply for financing to buy a new car, and your auto lender uses the industry-specific FICO AutoScore to assess your creditworthiness, Experian Boost wouldn’t show up or make any difference.
Experian Boost also cannot create a credit report where one does not exist, says John Ulzheimer, national credit expert who formerly worked for FICO and Equifax. While a program like TransUnion’s eCredable Lift may have benefits for someone with zero credit history, Experian Boost can only enhance an existing report, so you must already have at least one account reporting to the bureau.
Even after experimenting with Experian Boost, don’t lose sight of the healthy credit behaviors that can improve your score over time, such as a low credit utilization ratio, sustained positive payment history, varied credit mix, and limited inquiries.
You may find your score doesn’t increase at all after adding accounts to your report. That doesn’t mean adding that payment history won’t eventually increase your score over time, but you may not see an immediate boost.
Also, not all of your recurring payments — even those the program can add to your report — may work. The service provider must appear on your bank account or credit card statement to be captured by the system; if you pay by check or your bills are compiled into one payment, Boost is unable to read that as the correct payment.
“It was something I bumped into when I was enrolling,” Griffin acknowledges. “My water bill is incorporated with my trash pickup and other city bills in my municipal bill, so we can’t include that because we can’t break it out, we can’t identify it. That may be a hurdle in some instances.”
How to Use Credit-Boosting Programs
To use any new scoring program, you must opt in.
For Experian Boost, that means granting permission to the accounts you use to make your payments, such as checking, savings, and credit card accounts. While the bureau says Boost does not access your account information beyond collecting payment history, this access could be a drawback for some users.
UltraFICO also relies on permission to access your banking information, but scrutinizes your accounts further, looking into your day-to-day financial activity to determine your UltraFICO Score. TransUnion’s eCredable Lift, on the other hand, does not require access to banking information at all. Instead, you only need to grant permission via your utility accounts logins.
After opting in to Experian Boost, up to 24 months of payment history is added to your credit report, and reports each month like any traditionally-reported credit account. The payments you choose to add to your score are optional; you could add your Netflix bill but not your natural gas payment, for instance.
Only positive payments are added, so missed or late payments on these accounts won’t affect your score through Boost — though TransUnion’s program does report negative information in addition to positive.
But you should still view any account which is linked to your credit report as imperative to pay on time and in full each month to reap the benefits. Missed or late payments can still negatively impact your credit report eventually if the provider sends your account to collections.
“Really fit it into your budget,” Livadary says. “Making those payments is an essential, non-negotiable expense.”
So, Can Experian Boost Improve Your Credit Score?
Two thirds of people who sign up for Experian Boost see an increase in their score, and the average jump is 13 points, according to Griffin.
If your credit score is already at the higher end of the spectrum (mid-700s and above), any boost you see may be minimal. But for people with credit scores of 680 or lower, the average increase is 19 points.
“The people who see the most impact are people who have a short credit history, a thin credit profile made up of fewer than five accounts, or scores below about 680,” Griffin says. “So if you’re just starting out or you’ve had some credit issues in the past but you’re moving in the right direction, that’s who is benefiting the most.”
If you don’t see any benefits to your score initially, it is possible that Boost will help over time through a sustained positive payment history. Still, you can choose to remove Experian Boost from your credit report at any time with no negative repercussions; your Experian credit score will simply revert to what it was before.
Experian Boost can have a positive impact on your score, and may even propel you from one scoring category to another, helping you qualify for better lending terms on loans and credit. But it’s only a small piece in the bigger picture of improving your credit score.
Consider Experian Boost or other new scoring methods as a tool, but continue to practice the good credit habits that will lead to lasting excellent credit, too. Make timely payments in full on all your accounts, keep your utilization ratio low, and be smart about the lending products you choose to pursue.