Another (Potential) Opportunity to Boost Your Credit Score

A few months ago, we wrote about the soon-to-be-introduced UltraFICO Score and how it may help certain individuals with borderline FICO scores improve their creditworthiness.

Now we’re hearing about another tweak to the data that may be considered when developing an individual’s credit report and resulting score.

In a recent article in The Wall Street Journal, AnnaMaria Andriotis writes that Experian, one of the big three credit reporting agencies, will begin factoring in the cellphone and utility bill payments for some consumers early in 2019.

This addition to the credit reporting process should be a benefit to most individuals who pay their bills on time by increasing credit scores, and, as a result, raise the odds of loan approvals.

Why are we starting to see these changes to the credit reporting process?

According to the WSJ article, “The credit-reporting industry has been changing the way it does business in response to a mix of regulatory pressure and requests from banks and other lenders that want to make more loans to a wider swath of customers. Most lenders tightened standards dramatically after the 2008 financial crisis, and have been in intense competition for the most creditworthy borrowers ever since. And while most large banks have limited appetite for the subprime borrowers they lent to in the runup to the financial crisis, some have been eyeing customers with thin borrowing histories as a new revenue stream, a sign the lenders believe the good economy still has room to run.”

On the face of it, these changes are good. There were a large number of people affected by the 2008 Great Recession, many of whom lost the ability to access regular banking/financial industry products. This resulted in a significant hit to their creditworthiness and FICO scores.

The incorporation of new standards with regard to what is, and is not, reported on credit reports moves away from a strict FICO score determination process to one that looks at a variety of factors related to financial reliability.

The only question that needs to be considered, are the loosening of standards too great, potentially providing credit to individuals more likely to default?

At this point, I’d say no. The changes we’ve seen so far still factor how well a person can manage money, just in different ways.

The unknown, though, is exactly how much these new criteria will actually boost an individual’s FICO score.

If the additions to how an individual credit report calculates a FICO score jumps someone’s score from 680 up to 750, then that might be a problem.

We’ll just have to wait and see how these changes work in practice, and hope they don’t result in a weakening of the financial system like we saw pre-2008.

As for this newest change to credit reporting data, here are the specifics.

Experian Boost

• It’s a free service exclusive to Experian (the other two reporting agencies, TransUnion and Equifax, will not incorporate this data into their calculations)
• Primarily used to evaluate risk of consumers with little to no borrowing histories
• Phone (both cellular and landline), cable-TV, and utility bill payments will be factored into experian credit reports
• To participate, consumers will opt in and link the bank account(s) used to pay phone/utility bills
• Experian will track monthly payments of those bills, using the data as a factor when calculating certain FICO scores
• Experian will offer this new service as an option to consumers who sign up for its credit monitoring, identity-theft protection or other free or subscription based services
• If a consumer stops paying bills from the linked accounts, Experian will delete the account from its credit report, likely resulting in a FICO score decrease

You can sign up for free now, and Experian will let you know when the new service is available. The Experian Boost link is below.

Experian Boost Sign Up Link

Historically, credit scores have been based on payment of loans – credit cards, student loans, mortgages, etc.

These changes are now taking into consideration the payment of everyday bills when calculating an individual’s FICO score.

Whether these changes are positive, or not, really remains to be seen.

Bottom line, though, with this change from Experian, the incorporation of an UltraFICO score, as well as other changes to what is, and is not, considered when a FICO score is developed, more Americans are likely to see an increase in their credit scores come 2019.