New credit score changes help consumers – and lenders

Give us access to more of your data, and we may give you more credit score.

This is the underlying promise behind Experian Boost and the UltraFICO score. These new products from two of the most important credit names represent a major change in the world of credit scoring: Millions of consumers with little or no credit history will soon be able to change this by sharing their phone bill payment history. mobile or utilities or others. information from your personal bank accounts.

This is potentially a big problem for consumers. The companies behind these products, credit rating giant FICO, credit bureau Big Three Experian and data firm Finicity, said they could provide many Americans with higher credit scores and greater access to credit cards, personal loans and other types of credit.

However, it’s an even bigger deal for lenders, and that’s really the point.

Ultimately, these moves consist of offering lenders a larger pond where to fish for business. Lenders, not consumers, are the main customers of credit bureaus and credit score companies, and lenders are hungry for new ways to get solvent borrowers that they would otherwise have overlooked or get. market share offering more attractive conditions to borrowers than their competitors.

There are big changes ahead

UltraFICO and Experian Boost, which will be launched at least as a pilot program in 2019, depend on consumers choosing to provide key information about themselves:

• With Experian Boost, you can allow access to your mobile payment history and utility bills.
• With UltraFICO, you can allow access to basic information about your bank accounts. There are no transaction data involved, but average balances, account age, and activity frequency are among the things that could be.

In both cases, the information is monitored continuously. Although Experian Boost does not track lost payments, if a consumer stops paying a bill for three months, the information and associated momentum will be removed from the report. Tracking also stops if the consumer decides to revoke access and the information will be completely removed from the credit report.

Lots of time to come

Lenders and the credit score industry have long sought reliable and consistent access to account data that are not traditional forms of credit. Millions of Americans have never taken out a loan, so they don’t have a credit history, meaning banks don’t really know if it would be risky to lend them. This makes it difficult for these people to get a credit card or a personal loan, forcing them to rely on products such as payday loans.

Most of these Americans, however, have a cell phone and a utility bill. The idea is that if banks could see how these people do it with the payment of these bills, they could begin to understand how responsible these people are with their money.

However, it has been difficult to collect this type of data in the past. Both Experian Boost and UltraFICO said they will fight this problem by having the consumer provide it directly to the office. This, in theory, offers consumers many opportunities they hadn’t had before, which is almost certainly good news. Many Americans have wished to receive credit approval on more reasonable terms, but have been unable to qualify.

That said, a cloud still hangs over it all. Americans are already sitting on a mountain of debt, and these changes could give them access to even more. With that in mind, it’s never been more important for consumers to remember this – just because someone gives you a loan, that doesn’t mean you have to take it.

Matt Schulz is a leading industry analyst at CompareCards.com. You can follow him on Twitter at @matthewschulz or on Instagram at @ matt.schulz.