The new UltraFICO and Experian Boost credit scoring options are rolling out this year, and I’m very intrigued. The research I’ve done over the past few months points to significant benefits for a large portion of the population. These exciting changes in credit scoring are a huge shift, and could help you improve scores fast! Like, instantly!
I recently posted a Credit Karma Review and explain how I improved my credit score 100 points in a year. These are great, “evergreen” tips that will always serve you well. However, what I’m sharing right now, is a huge leap forward for those that are further behind.
These are the top points I’ve gathered, as a result of my research:
- The reason for the changes.
- How the changes work.
- How to use these exciting changes in credit scoring to your benefit.
The Reason for the Changes
So, who do we owe for such exciting changes in credit scoring? Well, it’s largely at the behest of the lenders. Lenders have been saying for years that they want a way to increase the number of good borrowers available to work with.
Unfortunately, the traditional credit scoring model often leaves out borrowers with good potential, due to a lack of credit history. There are also those who have made some minor credit mistakes in the past which shouldn’t define an otherwise responsible financial player.
In short, traditional scoring systems have left out a large pool of individuals that lenders feel should be given a chance to enter the market.
How the Changes Work
Credit is typically, solely determined by what good and bad debt you have obtained, and how you’ve managed it. These can be credit cards, mortgage loans, car loans, etc.
As an answer, UltraFICO and Experian boost are giving lenders the ability to consider other telling financial information such as current utility bills and rent payments, right from a user’s bank accounts.
The focus is on providing lenders alternative information that demonstrates the qualities of a good credit user, even if that individual currently has a low score or sparse credit history.
UltraFICO Changes in Credit Scoring
“If an applicant’s traditional FICO score falls short, a lender can offer to have the score recalculated to reflect banking activity. Would-be borrowers with at least several hundred dollars in their accounts, who have had the accounts for a while and who transact frequently and don’t overdraw are likely to see their scores rise, FICO said.”Life Hacker.com
Experian Boost Changes in Credit Scoring
“Consumers who choose to use Experian Boost (an online platform set to launch early this year) give the company permission to access their online banking accounts to look at utility, cable TV and phone payments for the past 24 months. The entire process should take about five minutes and the updated FICO score is delivered to the potential lender instantly . . . “This record of recurring payments will build out a consumer’s positive payment history and length of credit, so the majority of people who use the product will see an instant improvement in their credit score.””nbcnews.com
How to Benefit From these Exciting Changes in Credit Scoring
Those that will benefit the most from these changes, are individuals who currently have a low score, but don’t have overwhelming marred credit profiles (i.e. recent bankruptcy, charge offs, accounts in collection), as well as young adults who haven’t had a chance to prove credit worthiness. Ask yourself these questions:
- Have I paid my bills on time and can I show a record of good payment over 24 months?
- Do I have at least $400-$1000 saved in my bank account?
- Are my bank transactions regular and free from overdraft?
If you can say yes to the above, you will be good candidates for either program. However, if your bank accounts are fairly new, the Experian Boost option is best.
Experian Boost Stats
“About two-thirds of consumers will see an improvement in their credit score . . . “bankrate.com
“7 out of 10 consumers that show average savings of $400 without negative balances in past three months see an increase in their FICO score.”FICO.com
Where to Sign Up
You can opt out at any time and only good information is considered.
If traditional credit scoring options have let you down, you should consider enrolling in either of these programs. Credit impacts your finances in critical ways. You cannot save money well with bad credit. Over a lifetime, that can equate to hundreds of thousands of dollars wasted. But, there are options for you to make real improvements, quickly! And, now, more than ever!