Experian, one of the 3 major credit bureaus, has recently rolled out a marketing campaign to highlight their ‘Boost’ product – one which a customer can use to report accounts that traditionally do not get reported to the credit bureaus, to increase their credit scores.
Sounds great, right?
Well to see a higher score, it is great, but to get a loan or approval through a lender, it may cause problems for consumers who don’t understand how the program works or the impact it can have.
Experian boost links to a consumer’s financial institution to see bills being paid, and uses this data to “boost” credit scores based on timely monthly payments. While on the surface this sounds great, the lack of transparency in what’s being reported can cause issues for lenders, and on the mortgage side of things, “boosted” scores can’t be used for qualifying or for the purpose of getting a better rate or any other benefit to a loan program. And lenders won’t overlook “Boosted” credit. There are obvious markers showing a report that’s been updated with boost:
In fact, consumers can actually be inconvenienced when using Boost because to get their loan processed, a borrower must first actually remove the boosted accounts from their credit reports. So in these cases, Experian Boost makes the loan process more inconvenient for a borrower, and offers no benefit at all. In fact, even Experian acknowledges this, at least somewhat, on their site. On the Boost landing page, they include the disclosure:
“Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.”
“Not all lenders” means any mortgage lender using conventional or government financing, as MasonMac already confirmed with HUD and FannieMae that Experian Boost credit scores will not be considered in financing offerings from them.
Another potential downside to consumers is that even with an Experian Boost score, most lenders use averaging or more often, the middle score of the 3 credit bureaus. In the latter case, if a consumer has 3 scores – a 550, 575, and a 750 (higher than the other 2 assuming that’s the Experian Boost score), the middle score will still be 575, so the boosted score offers no benefit.
So what could Experian Boost be beneficial for? Well, for anyone looking to establish credit with limited credit history, Boost could provide a ….. Boost! Sorry, we couldn’t help ourselves. Also, while we’re mortgage experts, we aren’t experts across every field that uses credit scores, so there may be potential benefits elsewhere to using the boost product. That said, though, it’s important to weigh the positives and negatives, and be informed that if you’re looking for a mortgage loan, Experian Boost is going to cause you more headaches than it’s worth.