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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.

Why your 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 your number.

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 credit reports.

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.


Paul S Richard PhotoICFE eNEWS is available FREE upon request by visiting our Web site and filling out the contact form, and selecting "Yes" for "Add to Mailing List. Please pass this eNEWS on to your peers and interested others and invite them to subscribe for free. Also, visit the ICFE's new Web site: StudentDebtHelp.org

Sent by:

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 and founder of the College for Financial Planning in Denver, CO.) The ICFE is dedicated to helping consumers of all ages to improve their spending practices, 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 financial continuing education courses programs and resources. In addition to eight Certification courses covering identity theft, credit files, credit repair and credit scoring, among others, it also 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 library, a free eNews service, and an online resource center for students, parents and educators, plus financial education learning tools in the ICFE Book Store.

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