In late 2018, ConsumerAffairs heralded that two major changes in how credit scores will be determined were on their way.
That time has come. Both Experian and the Fair Isaac Corporation (FICO) have tacked on new metrics in hopes of improving how it evaluates the overall creditworthiness of borrowers. With the aim of gaining a clearer picture of how risk is defined, those additional metrics will include a wide variety of nuances from cable TV and utility bills to checking and savings accounts. Both scores are powered by Finicity, a financial data access and insights platform.
First out of the gate is Experian Boost, a product the company calls a “game-changing move.” With Boost, a consumer’s applaudable payment history is compiled by the data insight platform Finicity and dovetailed into their Experian credit file which, in turn, should “instantly increase their FICO Score."
“Experian Boost allows consumers -- for the first time -- to add positive payment information to their credit reports and potentially increase their credit scores instantly,” Jeff Softley, president of Experian Consumer Services, told ConsumerAffairs. “This gives consumers a level of control they’ve never had, which may help them get better credit products and better terms for those products.”
In an effort to make sure there were no unexpected potholes in Boost, Experian tested the platform with thousands of credit-active consumers. Here are some of the highlights from the Initial results:
Two-thirds of consumers saw an instant improvement to their FICO Score.
Depending on credit tier, 10 -15 percent of consumers moved into a better score category.
The average FICO Score increase was more than 10 points.
Consumer credit watchers also give Boost a thumbs-up. Elite Personal Finance writes that Boost should help 100 million people who previously didn’t qualify for mainstream credit, in addition to the 10 percent of all consumers who previously didn’t have a credit score.
In a separate move, Experian -- along with financial data aggregator Finicity and FICO -- have joined forces to create UltraFICO Score, a reporting system where the consumer grants permission to contribute information from a variety of sources including bank checking and savings statements. What UltraFICO will be taking a hard look at is the length of time a consumer’s bank accounts have been open, frequency of activity, and evidence of saving.
Even though UltraFICO is still in the testing phase, consumer credit critics are giving it a thumbs-up.
In Elite Personal Finance’s opinion, UltraFICO should tell a more comprehensive story about consumers’ financial behavior. It benefits both the consumer who has little to no credit history, as well as the consumer who is trying to rebound from a spate of bad financial luck while trying to rebuild their credit scores.
Naturally, encouraging words like that are exactly what FICO was hoping for.
"This changes the whole dynamic of the lender and customer relationship," said Jim Wehmann, executive vice president, Scores, at FICO. "It empowers consumers to have greater control over the information that is being used in making credit risk decisions. It also enables a deeper dialogue between the consumer and lenders to help both parties make better financial decisions."
How can consumers improve their credit profile via UltraFICO when it becomes available? Simple. Maintain an average savings account balance of $400 without any negative balances over a three month period. Any consumer who can check that box should see an uptick in their credit score by as much as 20 points.
This is good, right?
Despite the best-laid plans of UltraFICO, one consumer credit observer is waving the caution flag.
“Some [are concerned that] taking banking information into consideration could hurt those who otherwise have a good borrowing and paying history but have poor banking habits,” writes Elisa Ortiz at Lexington Law, a provider of credit repair services. “However, with the new UltraFICO credit score, things are poised to change.”
Ortiz’ main concerns about UltraFICO include:
It could ruin the credit score for others: while the new metrics could make it easier for people with thin credit histories and good banking habits to get good credit scores, it could very well do the opposite for those who have a good credit history but poor banking discipline.
It could open up lending avenues for people who are a credit risk: the country is still reeling from the meltdown caused by subprime loans in 2008. Open credit avenues for people who could not afford to pay them back was one of the main factors that caused that financial disaster because it put a large strain on lending companies.
Ortiz also sees a loophole that UltraFICO’s scoring system. She says the system may allow consumers who are less deserving or consumers that might otherwise be tagged as a high credit risk to obtain loans they may not be able to repay. If that happens, there could create a whole new cycle of financial disasters like an unforeseen identity theft risk.
“There is no doubt that big organizations that hold very sensitive information can face hacking attempts,” Ortiz said. “Now imagine if hackers got hold of all your banking information from the Finicity servers as well as your credit information from Experian? It sounds far-fetched, but this is something that could happen and create a whole slew of identity theft problems for the American people.”
How to sign up for the new reports
Signing up for Experian Boost is free, but a quick heads-up -- signing up also triggers an upsell for Experian CreditWorks Premium. With Premium, consumers can gain access to all three FICO Scores and credit reports for $1, but that $1 subscription only lasts seven days. After that, the service is $24.99 each additional month, but consumers may cancel anytime.
To start the ball rolling for Experian Boost, all consumers need to do is go to Experian’s special Boost website and grant permission for Boost to connect to their online bank accounts to identify utility and telecommunications payments. Once that’s taken care of and the consumer gives the OK to add Boost to their Experian credit file, an updated FICO Score will be delivered in real-time.
In ConsumerAffairs’ test of the Boost sign-up process, it took 15 minutes to get all the way through, including a call to Experian’s Boost support team after the last confirmation screen was in a seemingly endless loop.
As far as UltraFICO is concerned, the product has not yet been released to the masses. To sign up and be included when it’s rolled out, all a consumer needs to do is go to the UltraFICO site.