The US credit bureaus haven’t really covered themselves in glory when it comes to protecting your private data. So you might be skeptical about two new credit enhancement products that not only require credit information, but also access to your bank accounts.
Experian and credit-scoring company FICO launched UltraFICO last year as a way to raise credit scores based on how people manage their checking, savings or money market accounts. UltraFICO is in the pilot phase and should be more widely available this summer.
The credit bureau also launched Experian Boost, which allows people to add on-time cellphone and utility payments to their Experian credit reports. Positive bill payment history can add points to some credit scores, but people need to link their bank accounts for Boost to track those payments.
Both free products are for people with “thin” credit reports — which Experian defines as having fewer than five credit accounts — and UltraFICO can also help those with damaged credit. For Boost, people must register to become a member, while UltraFICO would be offered by lenders to applicants who might otherwise be turned down or get higher rates.
Both products obtain bank account information from data aggregator Finicity, which promises “bank-level security” including “best-in-class” third-party security certifications and regular audits by third-party security experts. internal and external teams.
“All data is encrypted throughout the process, from data entry to data transmission to data at rest,” says Finicity CEO Steve Smith.
“Data at rest” means that bank account information, including logins and passwords, must remain in a database for at least seven years for regulatory reasons.
Now, Experian isn’t the credit bureau that exposed the data of 145 million people in a massive breach two years ago. It was Equifax. But in 2015, Experian reported a breach of the same kinds of information — names, addresses, dates of birth, social security numbers, driver’s license numbers — belonging to more than 15 million T-Mobile customers. And last year, the Experian site exposed the personal identification numbers needed to unfreeze credits.
You have no choice but to be in a credit bureau database. Information about you and your credit accounts is shared with the bureaus whether you like it or not. With bank accounts, you usually always have the option of choosing who has access – and you should choose carefully.
Not for everybody
Boost and UltraFICO offer the tantalizing prospect of instant gratification – more credit points, instantly! – but it remains to be seen how many people will actually benefit.
You’ll probably want to pass on Boost if your credit is good. Your scores may increase by only a few points, or not at all. The product is intended for people with bad to fair FICO scores of 580 to 669. (The average US score is just over 700, or solidly in the “good” zone on FICO’s 300 to 850 scale.) Even in this case, Experian says that only 5-15% of Boost users who saw an increase had a big enough jump to move them up an entire category (from bad credit to fair, or from fair to good).
UltraFICO, on the other hand, targets people with scores ranging from the high 500s to the low 600s. Those most likely to benefit from UltraFICO maintain a cushion of at least $400 in their bank accounts and never let their balance fall below zero. If your bank account is constantly up in the air or dipping into the red, you’re unlikely to see any improvement in your scores.
Better ways to build credit
The other big downside: Boost and UltraFICO only work with Experian data and certain scores. (Boost works with FICO 8, FICO 9, VantageScore 3.0, and VantageScore 4 .0; UltraFICO only works with FICO scores.) If your lenders use other scores or other credit bureaus — and many do — You are unlucky.
In contrast, you can generally build your scores in all three offices by:
- Be added as an authorized user to someone else’s credit card.
- Use a credit loan, offered by many credit unions and at least one online lender.
- Use a secured credit card, where the credit limit is usually equal to a deposit made with the issuing bank.
The goal of giving more people access to affordable credit is certainly laudable. But before handing over more data to a credit reporting agency, you need to be sure that you have no better options and that the benefits are worth the risk.
Liz Weston is a NerdWallet columnist, certified financial planner, and author of Your credit score. Email: [email protected] Twitter: @lizweston.