A reader asked if she should sign up to Experian’s Boost. Are any disadvantages? Would it really help her credit score?
Experian’s new Boost facility was introduced in the UK in November 2020:
- it can increase your Experian Credit Score by a maximum of 101 points;
- it is set up so it can never harm your credit score.
Hundreds of thousands of people have used it. Let’s see how it works.
Boost’s idea – making regular payments should help your credit score
A credit score is a summary of your credit repayment history. If you have a good credit history, the theory is that you are less likely to default in future.
But at the moment only credit repayments and some utility bills are reported to Experian and the other two Credit Reference Agencies, Equifax and Transunion.
The idea behind Boost is that your credit score should be better if you make other regular payments on time. Experian says:
Experian Boost can help you increase your credit score simply by sharing how you manage your money.
It lets you share information about your regular spending, such as payments to savings accounts, Council Tax payments, and digital entertainment payments to the likes of Netflix and Spotify. If you’re making payments like this regularly, and not spending more than you earn, you could get an instant boost to your credit score.
Experian gets your payment details from your bank
These new payments aren’t reported to the Credit Reference Agencies at the moment. So Experian needs a different way to find out if you have been making them regularly.
Experian uses Open Banking for this. Experian sends you to a page from your bank where you log in and tell your bank to allow Experian access to view your transactions going back up to two years.
If you haven’t used Open Banking before, you may wonder if this is safe:
- Experian is authorised to provide secure, open banking-enabled services;
- your banking passwords remain private, Experian doesn’t see them;
- it can’t make any payments from your account, it can only view what has happened;
- this permission lasts for three months – after that you have to renew it.
Personally I wouldn’t be concerned about the safety of this, but it’s up to you what you feel comfortable with.
Who will gain the most from Boost?
Some people may have little or nothing on their credit record because they don’t have any loans or credit cards at the moment.
You may be in this situation because you are very young and haven’t had any credit. Or because you haven’t been in this country long. Or because you were insolvent with a lot of defaults that have now dropped off your credit records, leaving you with little still showing.
These people are currently stuck in a catch-22 dilemma – until they get credit they can’t build up a credit history, but it’s hard to get credit with no credit history. As a result, they may be turned down for credit, from a phone contract to a mortgage, even if these contracts would be affordable.
Boost can really help here. Adding some data to your credit record may be enough to enable you to get some credit, which will then further help your credit history and score.
If you already have a lot of credit data on your records, good or bad, then adding the extra Boost data may not make that much extra difference. It can’t harm your credit score, but you may not see a 50 point plus jump.
The snag… lenders may ignore it
It’s easy to think that your credit score is a really important number. A whole marketing industry has grown up to convince people that they have to know their score and must then try to improve it.
But really what matters is not the number on your report, but whether you can get a credit at a good rate. And increasing your Experian Credit Score doesn’t necessarily mean you are in a better position to get credit.
For a start, some lenders check TransUnion or Equifax data not Experian. They aren’t even going to see this Boost information.
But even lenders who use Experian data do not use the Experian Credit Score number that you see. Some only use Experian records, others get a score from Experian but this isn’t exactly the same as the one you see.
Experian is providing lenders with the Boost information separately. It’s then up to each lender how they use this. They could ignore it, treat it as interesting but less important than credit records, or see it as very useful.
The end result is your credit score may go up with Boost but it’s hard to tell how much difference this will make in the real world to your chance of getting credit.
It can only help though, not make things worse.
LOQBOX – an alternative
One alternative to Boost if you can afford to save money every month is LOQBOX. This takes your monthly savings and treats these as repayments on a one year, no-interest loan.
As an example, saving £50 a month is treated as a £600 loan. You don’t get this loan money at the start, but at the end of the year you get your savings back. You won’t be rejected for this loan because of poor credit.
This loan is reported to Experian, Equifax and TransUnion. It looks just like a normal loan on your credit report and after a few months repaying it improves your credit history. So all lenders will see it and use the information, they can’t choose to ignore it.