UltraFICO & Experian Boost
Good Solutions to Your Credit Challenges?
Ever since the announcements regarding the new credit scoring systems "UltraFICO" and "Experian Boost" were made last year (and their subsequent implementation earlier this year), questions regarding their use, legitimacy, accuracy, and abilities have come my way ...
In most instances, the questions come from those considering home buying or refinancing but suffering from credit scores considered "fringe" or low scores ... either as a result of NO/little credit or credit issues having occurred. They're looking for answers and fixes for the challenges they face.
And challenges do exist. While FICO reports that, for the first time since tracking these stats, the average national FICO Score has reached the 700 threshold (in actuality, 704, an increase of around 10 points above the score reported prior to the housing recession that began in 2006), credit remains of great concern for many home buying prospects.
Prospects know credit scores will weigh heavily in their upcoming mortgage search. They will dictate what mortgage options are available to them, what mortgage costs they'll face, the interest rate offered, and ultimately ... Mortgage Approval itself. So opportunities and methods to increase credit scores are obviously of great importance and interest.
Along comes UltraFICO and Experian Boost. They've caught these hopeful homebuyers' attention, as each declares they have the ability to establish or raise credit scores for their customers. But can they truly deliver on their promises? Let's do some examining ...
Below is some information you should have at your disposal prior to making a decision to use their services or not:
With UltraFICO ...
- UltraFICO is a free service
- UltraFICO influences Experian-based Credit Scores only
- Customers must "opt-in" to UltraFICO
- Clients link their Checking, Savings or Money Market Accounts (customer choice) to the service
- To link and access their banking info/data, customers must use Finicity (an account aggregation company/app)
- The account data/info chosen by the customer contributes to their UltraFICO score
- UltraFICO only works with certain FICO algorithms
What UltraFICO considers during its scoring:
- Evidence of customer's consistent Cash on Hand
- History of positive account balances
- Length of time customer's Account(s) have been open
- Recency/Frequency of client's Bank Transactions
... or basically, a client's "money habits".
It's important to point out: An UltraFICO Score does NOT replace a FICO Score.
With Experian Boost:
- Experian Boost is a free Experian service
- Customers must "opt-in" to Experian Boost, which means they must sign up for an Experian account
- By opting-in, customers agree to let Experian connect to their online bank account to track the utility and telecommunication bill payments they choose
- Finicity must be used for Experian Boost to access account info/data
- Experian Boost influences Experian-based Credit Scores only
- Signing up for Experian Boost gives you free access to your FICO Score from Experian (not Equifax or TransUnion)
- When "opting-in", customers grant permission to Experian Boost to seek online banking data/info on:
- Telecommunications Payment Data
- Utility Bills Payment Data
... in both cases, the customer must confirm the data received.
Sounds great, doesn't it? Well yes, maybe, and no ...
For those seeking to establish credit or repair severely damaged credit, these two credit-boosting services may serve a purpose. (Although as a Mortgage Originator, I maintain that credit can be easily established or repaired via other methods. See below.)
For those that find themselves in these scenarios and also thinking of utilizing either service, remember to always ask the following before applying for any new credit, "Do you report to the Credit Bureaus?"
Your goal is to have that new credit reflected in your Credit Report, so proceed with any new credit application according to the answer you receive. (Pass on applying if they cannot answer this question definitively.) If you decide to move forward with an application, be aware that your new credit will typically start to show on your credit report within 30 days of the close of the account's billing cycle.
Now it's important to point out at this time: Differing algorithms and scoring models for credit scoring exist. Debt.org reports that FICO alone "has more than 50 different versions of your score that it sends to lenders. The score may change, depending on what company asks and what was important to that company in calculating your score". Other models exist too.
Scoring models, such as VantageScore and Community Empower, and are also being used by companies.
That's a lot of information to digest. But what does it all mean for consumers?
Well first, it means the credit score that you receive from your credit card company ... (think Discover, Visa, etc.) can be quite different than the credit scores received and used by your bank for an auto loan. Different scoring models reap different credit scores.
And let's go a few steps further. The credit scores referred to in the above paragraph? Those credit scores can also be different from those utilized by your insurance company, telecommunication, and utility companies, etc. And they're all going to be different than those used by most mortgage lenders, as that algorithm and scoring model is specific to the mortgage industry alone.
While doing some research for this article, I ran across a statement regarding Experian Boost, made by the Experian credit bureau themselves. I thought it pretty interesting and revealing.
In that statement, Experian said, “Only positive payment histories will be aggregated through the (Experian Boost) platform and consumers can remove the new data at any time.”
In other words, customers choose the accounts they want to link and report to Experian Boost. It's only natural to assume that customers will choose only those accounts that reflect well on their finance/credit choices and ultimately on their Credit Scores.
But Mortgage Lenders want and require a more complete and thorough picture of an applicant's credit at the time of their mortgage application and underwriting. That means negative info along with positive info must be received and vetted.
To that end, Mortgage Lenders typically request what is called a "tri-merge credit report" or Residential Mortgage Credit Report (RMCR) for mortgage applicants. This tri-merge report takes the data provided by the three (3) major credit bureaus (Experian, TransUnion, and Equifax) and merges it into one single report. That report provides a thorough and detailed picture of the applicant's entire credit history including their credit habits and how they've utilized their credit in the past.
Currently, neither UltraFICO nor Experian Boost is acknowledged by all algorithms, including that used by Mortgage Lenders. That's a big problem for those hoping to buy and finance (or refinance) a home now or in the future.
So what should you do if you're in need of reliable credit info or assistance? If you hope to establish or improve your credit scores?
The answer is fairly simple: Seek the guidance and assistance of an experienced mortgage lender.
Doing so is a wise decision whether your goals include home buying or not, as a mortgage lender can provide you sound timely advice that will help you establish and/or improve your credit and credit scores both in the short and long term. And best of all, their service is typically provided at no charge.
I think it's never a bad thing for anyone to seek information and opportunity to improve upon their finances or credit scores. I applaud that heartily.
But until the benefits reaped from UltraFICO and Experian Boost are more inclusive to a wider range of credit scoring models and algorithms, neither may provide the results a consumer really needs or is ultimately hoping for ...