ICFE eNEWS #19-01 - January 2nd 2019
Why Your Credit Score Needs a Boost
Like Christmas shopping, training for a marathon or starting
a new diet, the hardest part of obtaining a good credit score
lies at the beginning. The roadblocks preventing people -
particularly millennials - with thin-to-nonexistent credit
history from securing an auto loan or mortgage at reasonable
rates can prove so daunting, discouraged consumers drop out of
the system altogether and join what the industry labels as the
"credit invisibles," a group numbering 26 million as estimated
by the Consumer Finance Protection Bureau. But consumer credit
reporting agency Experian just revealed their latest effort to
bring these wayward consumers back into the fold by announcing
individuals can enter personal financial data via a new online
platform that could instantly raise their credit scores - and
potentially save thousands of dollars on everything from
high-end credit cards to personal loans.
credit score needs a boost
Your credit score comes
courtesy of either FICO or VantageScore, two companies that look
at all of your personal financial data that's collected by
credit agencies Experian, Equifax and TransUnion, who then run
those numbers through their own proprietary formulas to come up
with a number that lets credit lenders (such as credit card
companies, insurance companies or bans) see how much of a risk
it is to loan you money.
For example, if you're late paying your
credit card bill, the credit card company may report your
tardiness to Experian, Equifax and TransUnion, which each place
it on the credit report they have on you. That late payment then
lowers your credit score when FICO or VantageScore go to tally
Normally you don't get to pick and choose
what data appears on your credit report. Historically, the
credit agencies and FICO and VantageScore are most interested in
looking at your forms of credit - whether you pay your credit
card bills or student loans on time - as opposed to other forms
of spending. That's bad news for people who avoid using credit
cards and other types of consumer credit in their daily lives,
but then want to purchase something for which they absolutely
need credit, such as getting a mortgage loan for a house. The
traditional credit scoring system would consider these
individuals high risk (even if they are perfectly responsible
with their finances), and lenders would limit their own exposure
by charging higher interest rates or other fees on the loan.
How Experian wants to boost your credit score
Because consumers who have little credit history but are
responsible with their money represent an untapped market to
lenders, Experian (and the other credit reporting agencies) have
tried to find other methods of quantifying the risk these
consumers represent. Experian's new online platform (called
Experian Boost, which launches in early 2019) allows consumers
to report utility and telecommunications payments made via bank
account transactions, a type of payment usually absent from
In a press release, Experian claims reporting
these payments via Experian Boost will give the biggest bump to
those with scores between 580 and 669 - and considering an
Experian report from earlier this year found the average
millennial credit score at 638, this new platform seems aimed
squarely at younger consumers who have fallen through the cracks
of the traditional credit scoring system. "Limited credit
activity and history are key barriers for consumers to achieve
their financial goals," said Dara Duguay, executive director of
the nonprofit Credit Builders Alliance. "We fully support
initiatives that promote financial inclusion and think Experian
Boost could play an important role in overcoming that barrier."
The ICFE advises consumers to use credit offerings based on
their newly-improved credit score with great care.
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Also, visit the ICFE's new Web site: StudentDebtHelp.org
Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by
the late Loren Dunton (creator of the Certified Financial Planner (CFP)
designation). The ICFE is dedicated to helping consumers of all ages to improve
their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE is a partner with the national Jump$tart Coalition for Financial
Literacy and the California Jump$tart chapter. The ICFE staff is also active
with San Diego Saves and Military Saves, both offshoots of America Saves.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
The ICFE helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.