Do you find yourself falling just below your target FICO® Credit Score? Is your credit history not as robust as lenders would like? Experian Boost may be the solution.
What is a FICO® Credit Score?
To understand why Experian Boost may help, you must first understand what a FICO® Credit Score is. The Fair Isaac Corporation or FICO® is the originator of a scoring system that helps lenders determine how likely you are to repay a debt. Of course, the calculations are all hush-hush or people would be able to game the system, but we do know that the scores are based on the credit reports provided by the major consumer credit bureaus: Equifax, TransUnion and Experian. You can see the general breakdown of how it’s calculated at What Is the FICO® Credit Score?
FICO® Credit Score is a singular term, but there is more than one type of score – a base score and scores adjusted for specific industries (credit cards, auto loans, real estate, etc.). However, all of them are a 3-digit score that range from 300 Poor to 850 Exceptional (670-739 is Good). Not all lenders use the FICO® Credit Score, but a majority do, so you want to make sure your score is good before applying for a home loan.
What is Included in a Credit Report?
Because a FICO® Credit Score is based on your credit reports, they are where you should start if you want to make improvements to your score. Your credit report includes your credit accounts or tradelines, inquiry information (when it’s been accessed by companies), and bankruptcies/collection information. There are a number of websites that allow you to pull your report for free without any penalty to your score. You should make it a habit of monitoring your credit report. If you see incorrect information, each credit bureau has a way of reporting it. This could improve your score.
In addition to reporting inaccurate information, the biggest factor that can improve your credit score is paying your bills on time, but you’ll notice not all your bills are included on the credit report. Experian wants to improve your credit score by acknowledging your payment habits with those other bills.
What Does Experian Boost Do?
If you’ve been making your utility and telecom bills on time, the Experian credit bureau will allow you to factor that into your credit score by using their free service Experian Boost. But here’s the catch – they need access to your bank account to do it. That right there will hold some people back from using the service. After all, past events have shown that no online system is 100% immune to technical breaches. However, if you seriously need this boost and can’t spend months working on your credit, this could help.
Once Experian Boost connects to your bank account and you verify the information you want added to your report, your FICO® Credit Score will update in real time. Yep, instantly. Well, the whole process takes about 5 minutes, but that’s about as instant as it can get.
Who Will Benefit from Experian Boost?
Not everyone will benefit from the new data provided by Experian Boost. According to the company, users with “thin files” (low credit history that prevents scoring) and scores 680 and below will see the most improvement. Experian research showed that “75% of consumers with FICO® Scores below 680 saw an improvement in their credit scores…And 10% of consumers who previously had a “thin file” (not enough credit history) became scoreable after taking advantage of Experian Boost.” You can see more stats on their website. Consumers with credit scores that are already Good could see an increase that could potentially save them thousands of dollars in the long run.
Is Experian Boost for You?
We are not lenders, mortgage experts, financial gurus, or employees of Experian or FICO®, and we don’t know your financial history. In fact, we can’t say if Experian Boost is a good option for you, as this tool is a first of its kind. But Experian believes it will help millions of people on the cusp to reposition their credit scores to put themselves in a better position for buying a home or to qualify for credit lines that could improve their score even more. They also plan on expanding what bills they include.
Additionally, keep in mind that FICO® announced last October that a new score is coming that takes into account how you manage your checking, savings and money market accounts. So, you may see a boost in your credit score in 2019, depending on your financial habits. If you’re not in a rush, you may want to wait on using Experian Boost.
Ready to buy a home in the Wilmington area or want a referral for a reputable lender? Give us a call at (910) 202-2546 or send us a message. We are happy to help with everything from getting preapproved to signing the paperwork on closing day.
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