Should You Use Experian Boost Before Applying for a Mortgage?

Posted on October 6th, 2020

You may have seen commercials lately for “Experian Boost,” a program that says it can increase your credit scores instantly.

Their latest ad spot features wrestler John Cena riding around on a horse, giving people with no hope of getting approved for a loan, well, hope.

Even better, it’s free to use. So if you’re on the cusp of average, good, or even excellent credit, perhaps a boost could improve your approval odds and save you money.

Well, that’s the idea at least. In practice, it might not actually work that way, especially if we’re talking about a home loan.

What Is Experian Boost?

  • A free service from credit bureau Experian that may increase your credit score instantly
  • Works by adding positive payment history to your credit report for things like phone bills or even Netflix payments
  • These recurring utilities and other monthly payments often aren’t factored into your credit history
  • By connecting your bank accounts, Experian can factor in these payments and give your credit score a boost
  • Average Experian Boost users see their Experian-based FICO Score 8 rise by 13 points

As the name suggests, it’s a credit score boosting program from credit reporting company Experian, which together with Equifax and TransUnion, makes up the three major credit bureaus.

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How it works is fairly simple – you sign up for Experian Boost, then connect your bank account(s) to your profile.

This essentially provides read-only access to your bank account history, allowing Experian to quickly scan and find qualifying payment history.

Once the scan is complete, you can choose and verify any positive payment history you’d like added to your credit file.

So if you have a Netflix bill you’ve been paying on-time for the past five years from said bank account, you can add it to your credit history.

The same goes for a cell phone bill or another monthly utility that you’ve paid on-time for years.

Instead of credit bureaus only counting things like your credit card payments, auto loans/leases, and mortgages, they can include items that often don’t make the cut.

This, in theory, can boost your credit score instantly, since positive payment history is a big part of what drives your score to begin with.

For example, if you had a 610 credit score, and needed a 620+ FICO score to get a home loan, you might give Experian Boost a whirl to get that instant boost.

Experian compares Experian Boost to things like credit repair, which they say can cost thousands of dollars, and piggybacking services, which they say can be risky and seen as “deceptive by lenders.”

Could Experian Boost Actually Help You Get Approved for a Mortgage?

  • Experian Boost only affects your Experian-based FICO score
  • Mortgage lenders use tri-merge credit reports that incorporate scores from Equifax and TransUnion as well
  • It also only applies to the FICO Score 8 model and mortgage lenders often use FICO Score model 2
  • Chances are it won’t help when it comes to applying for a mortgage unless it applies to all three scores and the right model is used

Here’s the problem when it comes to mortgages, or perhaps other types of loans as well. And even Experian says this on their website.

Some users may not see improved credit scores or approval odds, and not all banks and lenders use the credit information incorporated by Experian Boost.

Additionally, Experian Boost uses the FICO Score 8 model, and as you may have suspected, your lender may rely on a different model of FICO score, or a completely different credit score altogether.

In other words, while your FICO Score 8 may have risen 13 points thanks to Experian Boost, your mortgage lender might pull FICO Score 2, which is commonly used in mortgage lending.

So even though your FICO score may have increased from 610 to 623, enough to perhaps get approved for a mortgage backed by Fannie Mae, your lender may come back and tell you it’s still a 610.

Another issue is mortgage lenders rely on tri-merge credit reports, that is, credit report information from Experian, Equifax, and TransUnion, along with three credit scores.

They then use the middle score for qualifying purposes, not just one of the scores.

There’s a good chance your credit scores will vary from bureau to bureau because lenders may report select credit history to only one or two of these agencies.

As such, your FICO scores may not be the same if the information they have on file differs in any way.

Simply put, Experian Boost may increase your Experian credit score, but it won’t boost your scores with Equifax or TransUnion.

The only real benefit could be a slightly higher Experian score, which if it happens to be your middle score, could potentially result in a higher score being used by a mortgage lender, assuming the right FICO model is used to begin with.

In summary, Experian Boost probably won’t increase many consumers’ odds of getting a mortgage until all three credit bureaus are on board, and lenders use the most updated FICO model.

Published at Tue, 06 Oct 2020 15:44:50 +0000

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