In an effort to give consumers more opportunities for getting loans--including credit cards--Experian is launching a new way to improve or enhance one's credit score.
Called Experian Boost, this is a new opt-in platform that consumers can use to add more information to their credit history in the hopes of generating a higher credit score.
The product is opt-in because consumers have to authorize Experian to have the ability to connect to their online bank account. Experian then looks at their records of recurring bill payments, including utility, cable and cellphone payments and uses that information to determine the likelihood that they'll be able to pay back a loan.
Consumers have to verify the information and agree to add it to their credit file. Then Experian uses it, along with the rest of their credit history to instantly deliver a new FICO score.
"Globally, we are constantly innovating and leveraging technology to find new ways to help consumers gain access to quality credit, while promoting fair and responsible lending," said Experian Global CEO Brian Cassin, in a statement. "We are committed to financial inclusion, and Experian Boost is the latest example of our efforts to increase consumer awareness of credit’s impact and value while giving them greater control."
Credit bureaus currently calculate credit scores using certain types of information, including payment history, amount of debt, amount of credit, how long the credit history has existed, and credit mix. There's usually a catch-22 for new borrowers, who often have a difficult time getting credit because they have no credit history, but they have no credit history because they can't get credit. Not having credit can also affect the information on one's payment history.
With Experian Boost, consumers will be able to provide more information to flesh out the credit report, particularly in showing how they can prove a history of paying bills on time.
Experian also hopes that this new service will help people who have credit scores between 580 and 699. This range mostly encompasses subprime borrowers in the fair and poor classifications of credit scores. The fair category includes consumers with scores between 580 and 669. Borrowers in the poor category have scores at or below 579.
In some early testing and analysis of Experian Boost, the company found that 75 percent of consumers who had a credit score below 680 saw improvements in their score with Boost. The company also found that 14 percent of consumers in the poor category were able to increase their score to a number that's closer to prime.
Bumping up your score can be a big deal because credit scores help lenders determine borrowing terms -- i.e.-- how high your interest rate will be, and thus how much in interest payments you'll have to make over time.
Experian cited numbers from Credit Builders Alliance, a nonprofit organization that helps other nonprofits with credit information, saying that consumers who have subprime credit scores can pay upwards of $200,000 more than prime borrowers during their lives, just because they have lower credit scores. By boosting their credit scores with this additional information, they could save money on car loan interest and credit card interest every month, which can help them get out of debt more quickly or achieve other financial goals.
"Limited credit activity and history are key barriers for consumers to achieve their financial goals," said Dara Duguay, executive director, Credit Builders Alliance, in a statement. "We fully support initiatives that promote financial inclusion and think Experian Boost could play an important role in overcoming that barrier. We look forward to seeing how Experian’s new platform impacts consumers."
Experian Boost will formerly launch in early 2019, but consumers can register at its website for early access. The free Experian membership also includes a free credit report and a FICO Score.
