Cut to commercial: A former pro wrestler decked out in evening clothes charges in atop a giant purple cow, offering to instantly boost your credit score. Is this for real?
Well, not the cow. In fact, the ad agency had to issue a statement assuring concerned viewers that no actual cows were used or harmed in the filming of the commercial. But the product, Experian Boost, is for real and could add several points to your credit score overnight. Here's how it works.
We are all familiar with the ubiquitous FICO score, an algorithm devised by the Fair Isaac Corporation based upon a borrower's credit history and usage profile. Each of the three reporting agencies, Experian, TransUnion, Equifax, compute their own version of the FICO score, ranging from 300 to 850, based upon data reported to that agency. Because it is so widely used by lenders in making credit decisions, a marginal FICO score can cause loan applicants to be declined or to pay higher interest rates. However, not all creditors report to the agencies. For example, rent payments and utility bills are seldom submitted to a credit bureau and are excluded from the score, despite a long history of timely payments. Enter Experian Boost.
Introduced in 2018, Boost is a free service that allows consumers to include such periodic payments in its computation of the FICO score. Customers create an account and then link the bank account from which they pay their regular expenses, such as utilities, rent, and even subscription services like Netflix and Hulu. Experian Boost then searches for recurring patterns of consistent payment and presents a list to the customer for review. Each account selected by the customer is then included for reporting in Experian's FICO calculation. The program searches retroactively for up to 24 months, providing significant additional payment history that could make a material difference in the consumer's score. Experian reports an average increase of 14 points, enough to make a difference in a marginal credit score (around 580 to 620).
It's hard to see a downside. If the product does not improve your score, you can simply unplug it and everything returns to the status quo ante. Furthermore, Experian only considers on-time payments and ignores any late payments that were not previously reported by creditors. There is no cost, although the company will rarely miss an opportunity to suggest that you upgrade to a monthly subscription for additional services. Experian will also use your data to target ads for credit products based upon your profile. Welcome to the internet.
In addition to reporting utility and streaming payments, Boost includes free access to your Experian Fico score, as well as rudimentary credit monitoring and alerts.
Other similar products have been less well received so far. Perch Credit reports utilities, rent and subscription services to Equifax and TransUnion, but its website is uninformative and the product only works on Apple devices. TransUnion also launched eCredable Lift, but it only reports utilities and charges an annual $24.95 fee.
Some third-party apps perform the same types of data scrape of your bank account and report to the credit agencies but are not worth the relatively high cost. For example, ExtraCredit milks customers for $24.95 per month (and has no bovine mascot.)
Experian's product applies only to its own FICO score computation. Creditors pulling your TransUnion or Equifax scores would see no difference. And note that most mortgage lenders still use an older version of FICO that does not reflect the Boost data, so the product may not improve your chances of getting a home loan if it's a close call.
Experian Boost is best suited for consumers with moderate credit scores who may be on the bubble of qualifying for a loan, and for borrowers with "thin" credit files who have not had time to build a robust record. The price is right, there is little risk, and you can terminate the service at any time. Of course, the best credit strategy is still the old-fashioned way: building a consistent history of responsible borrowing. But at the margin, Experian Boost could make the difference.
No cows were harmed in the writing of this article.
Christopher A. Hopkins is a chartered financial analyst in Chattanooga.