TAMPA, Fla. — Get ready for the biggest shift in credit reporting and scoring system in decades.
- New credit system may boost scores
- New: Scoring agencies to use bill history, bank accounts to gauge
- Experian
Two of the companies that help determine your cost to borrow money are adding new features this year that could give your credit score a boost.
For decades, your number was based mostly on your history with payments on things like credit cards and loans.
Now, two new changes are coming that might affect the way your score is calculated.
For the first time ever, consumers can grant one of the scoring agencies access to their online bank accounts for a look at their bill-paying history.
It would potentially improve the credit score of many Americans, particularly those with weak credit or limited credit history. And it would provide a broader base of customers for banks to lend to.
The companies estimate that 79 million Americans have subprime credit scores, which it puts at 680 or below. And 53 million do not have enough data to generate a FICO score.
These scores are used to help evaluate credit worthiness for credit cards, loans and more.
"Crummy credit is really expensive," said Matthew Schulz, a financial expert with comparecards.com. "And some of these changes give people the opportunity to boost their credit score and that could potentially save them a lot of money."
The first change: "Experian Boost" can potentially get you a higher credit score based on your internet, utility and cable bill payment history.
This is optional, meaning you can decide whether you want the credit agency to have access to your bank account.
"It pulls that information out and analyzes," Schulz said. "And says wow you've done a good job of paying those bills. That means you're probably a better credit risk than you otherwise would have looked."
The second program: "Ultra-Fico" focuses on your checking and savings accounts.
This gives lenders a better idea of how you're managing your finances overall, and can help you if you have some savings, but are on the verge of getting denied.
"It can give you a little bump and maybe get you that loan that you didn't think you were gonna qualify for," Schulz said. Or maybe even get you a better rate."
Privacy advocates say not everyone will want to hand this private information over to these companies, especially in light of the infamous Equifax hack in 2017 exposed the personal information of nearly 150 million Americans.