Credit agency Experian has introduced their new service, ‘Experian Boost’. Just by paying your utility bills, council tax and TV streaming services could increase your credit rating, meaning you have better access to borrowing. And although this is all completely free, is it all it’s cracked up to be?
Many of us have been there. You have a couple of late payments on an account and before you know it, you have a low credit score. And then, when it comes to borrowing money, you suddenly realise what a major impact it can have. In a best-case scenario, it means receiving poorer interest rates than a company’s advertised rate, meaning higher monthly payments. But if you have a bad credit score, it may block your borrowing completely. This can mean no new credit card, no mortgage and in some cases, no mobile phone contract.
You don’t have to make late payments to receive a low score. You may find it difficult to apply for financial products if you have a thin credit history. Surprisingly, even a lack of credit accounts can also prove an important factor in deciding whether the likes of mortgage lenders will consider allowing you to borrow money. Many of these companies want to see a positive payment history before they even consider sending money your way.
But all is not lost. It is possible to start rebuilding your credit, although it often takes quite some time. Keeping your credit card payments, loan payments and utility payments up to date will go a long way to building credit scores back up.
And now, Experian Boosts offers you a credit repair scheme that could help you reach an excellent credit score.
How do I know if my credit rating is poor?
Before we get started, you might not even be aware
An easy way to know if you have a poor credit rating is if you’ve been turned down for some borrowing. Otherwise, you can find out by getting a free Experian credit report, or you can pick up reports from rival companies like Credit Karma. These reports give you a rating and will let you know the likelihood of being able to borrow money.
It’s important to note that a credit report is not the deciding factor companies use to lend you money. They use it as an indicator. A credit report will be based on information from one of the main credit agencies.
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What is a credit agency?
A credit agency is a for-profit company that will collect financial information about you, such as your level of debt and how well you keep up with repayments. They will then assign you a numerical score, passed on to potential lenders.
There are three main credit agencies within the UK
- Experian
- Equifax
- TransUnion
When considering who to lend to, the lender may check credit scores from 1, 2 or all 3 of the above.
Who is Experian?
Based in Ireland, Experian is an American company that collects and aggregates information from over 1 billion people across 37 countries. Within the U.K., it is part of the government’s Verify ID system and USPS Address Validation.
How does Experian Boost work?
In the past, the fact that you regularly had months of payments to the council and various companies without issue had no impact on your credit score. This is because they weren’t considered credit agreements, even though you were obliged to pay them.
However, Experian Boost promises to change all that. By linking to your online bank account, if your payments are in good order and you don’t spend more than you earn, your credit rating with Experian will automatically be boosted.
How to sign up
If you’re not an existing customer, you must sign up for an Experian account, which is free. As a word of warning, they do ask for details such as your income and your homeowner status, but these are purely optional and don’t need to be answered – although that isn’t completely clear.
You will need to confirm that you are the rightful owner of the information and will be asked a few simple questions, such as which bank accounts you hold.
Once you have an account up and running, there will be an option to join Experian Boost. To do so, you will need to link Experian to your current account through Open Banking. If you’ve never used it before, Open Banking is a recognised method of linking financial accounts by many major U.K. banks and budgeting apps. Experian will only have read-only access to your bank account and cannot make any transactions.
However, if you have a perfect credit score with Experian and want to try out the Boost option, you can’t. It will only allow you if your credit status can be improved.
What type of payments are taken into consideration?
You can increase your credit score if you pay out for
- council tax
- digital entertainment subscriptions (such as Netflix, Amazon Prime and Spotify)
- regular payments into a savings account or investments
What impact does it have on my credit rating?
Experian marks credit scores out of 999. The higher the number, the better your rating is. With Experian Boost, as long as you have regular payments leaving your account, your credit rating will increase by 66 points.
According to Experian, consumers in the US have added 29 million points to their credit scores using Experian Boost, which was introduced in 2019.
Can my credit rating go down?
No. Experian promises that the worst that can happen is that your credit rating will not move.
How much does Experian Boost cost?
Nothing. The service is completely free.
Why is it on offer?
I would love to say that Experian Boost is there to help customers and give them a helping hand in borrowing. However, credit agencies like to collect data and sell it on. Accessing people’s banking behaviour will give them more information they can collate together and sell.
But it’s important to note that this information is aggregated and shouldn’t contain any personally identifiable data.
Is Experian Boost worth it?
Ultimately, this is a free tool and could be helpful as a boost for those with a limited credit history or people just looking to rebuild their total score.
Your credit rating with Experian will instantly increase if everything is in order. Plus Experian is also a useful credit monitoring tool.
But remember, credit agencies don’t lend you money. Even having a perfect score with one or more does not guarantee you a loan or the best rate. Lenders have their own criteria when they choose suitable customers.
If millions of people suddenly receive a boost to their credit rating thanks to Experian Boost, will lending institutions drop their loan rates? This has yet to be seen, but I’m guessing not.
And finally, not every company uses Experian as their chosen credit agency. Figures suggest the percentage of companies that use the following credit agencies.
- Experian 76%
- Equifax 54%
- TransUnion 30%.
So, there is a chance that your chosen lender might not even use Experian.
But, as it’s a free service, I see little harm in trying Experian Boost and will be interested to know people’s experiences and whether it improves their loan chances.
Why not look at ten other ways to improve your credit rating?
FAQs
How long does Experian Boost take to update?
Your score is updated every 30 days if you have a free account.
Is Experian Boost safe?
Experian Boost uses bank-grade 256-bit SSL encryption to secure your data.
Why does Experian Boost need bank details?
This allows Experian to see if you are making regular payments and not spending more than you earn.
P Roniman
Wednesday 2nd of December 2020
I do not see what relevance any of this is as whilst Experian score can give you an indication of your overall finances, it is totally meaningless to any lender. The score will not be seen by any lenders whatsoever so just why would you allow Experian to access more data just to get nothing in return?