Experian’s Experian Boost: How It Works and Its Impact

Experian Boost is a unique program that uses non-traditional data, such as utility bill payments, to enhance your credit score. This article explains how the program works, its impact, and what you need to know.

Understanding Experian Boost

Experian Boost is a consumer-friendly program that allows you to integrate your non-traditional financial data, like utility bill payments, into your credit report to generate a FICO 8 credit score. Unlike traditional credit data, which primarily includes payment history and credit utilization, Experian Boost can help you generate a credit score even if you have a limited credit history, often referred to as a "thin credit file".

Average Impact of Experian Boost

According to Experian, users who received a boost witnessed an average increase of 13 points in their FICO Score 8 based on Experian data. However, it's important to note that not all users see improvements, and not all lenders use the credit information affected by Experian Boost. This program might be most beneficial for those with limited traditional credit data.

Source: Experian's official statement on Experian Boost

Sources of Credit Data

Credit scores are generated by credit report vendors, such as FICO, using data from credit bureaus like Experian, TransUnion, and Equifax. The credit bureaus act as data repositories, storing the information provided by financial institutions, utilities, and other credit grantors.

Factors Influencing Credit Scores

Factors that influence your credit scores are diverse and dynamic. The main components include:

Credit Utilization (30%): The percentage of your available credit card limit that is in use. Lower balances, especially zero, are considered positive. Credit Inquiries (10%): Each new line of credit and inquiry can temporarily impact your score, but the effect diminishes after 90-120 days. Credit History (15%): The age of your credit accounts contributes to your score. New accounts can initially cause a slight decrease, but as they mature, they improve the score. Payment History (35%): Late payments can significantly hurt your score, but the impact decreases over time.

Experian Boost specifically targets the payment history component by incorporating utility bill payments into your credit report. This can have a positive impact on your FICO 8 score, especially for those with limited or no credit history.

Limitations and Considerations

While Experian Boost can provide a significant boost to your credit score, it is important to understand the limitations and considerations:

Other Credit Bureaus: Experian Boost only affects your FICO 8 score generated by Experian. Other bureaus like TransUnion and Equifax will not reflect these changes, and lenders who do not use Experian may not consider the improved score. Multiple FICO Models: Creditors often use different FICO models, and changes to one may not affect all aspects of your credit score. Achieving Financial Stability: While Experian Boost can provide a temporary boost, building a strong credit history over time is crucial. Maintaining current payments and managing credit utilization are essential for long-term credit health.

In conclusion, Experian Boost is a valuable tool for those looking to improve their credit score, especially if they have limited traditional credit data. However, it is just one piece of the puzzle in establishing a solid credit history.

For more detailed information and strategies for improving your credit score, I recommend reviewing posts by credit experts such as George Gunderman and Joe Parsons on Quora.