Millions of people could get an instant credit score boost thanks to a new tool from Experian, which allows you to share previously locked-up information on your salary, council tax bill payments, savings and even subscriptions such as Netflix.
The tool called Experian Boost uses open banking, which allows you to grant Experian permission to view your current account transactions without revealing any login details. With access to scan this information each month Experian can determine whether your spending reflects habits that potential lenders would find attractive.
Experian estimates that 17 million people could benefit from an instant increase to their credit score. In particular, it has the potential to be a huge help to those who have a ‘thin’ credit history – for instance, young people who have never had a credit card or loan before, or simply those who haven’t needed to borrow.
Here, Which? explains how the open banking tool works and what you should consider before signing up.
What is Experian Boost?
Experian Boost is the name given to Experian’s free new tool, where you can give the credit reference agency permission to view the incomings and outgoings from your current accounts.
At the moment, it only supports the big nine banks that had to sign up to open banking when it launched in 2018. These include Allied Irish Bank, Bank of Ireland, Barclays, Danske Bank, HSBC, Lloyds Banking Group, Nationwide, NatWest Group and Santander. Other banks may be added in future.
By giving Experian permission to access your accounts (including joint accounts) via open banking, it will assess real-time banking information – none of which has been traditionally factored into credit scores. This includes your income and general spending, plus regular payments for council tax, savings and investments, and digital entertainment services such as Amazon Prime, Netflix and Spotify.
Experian says scores could increase by up to 66 points and estimates that one in 10 users could go up an Experian credit score band.
It’s worth bearing in mind there’s a huge amount of data that’s used to create your credit score – most of which you can’t opt out of. Our investigation from 2018 – Credit scoring: are you in the dark? – delves into the power of credit scores and can help shed more light on how the process works.
Will my banking data be safe?
There are strict regulations around the use of open banking; third parties (such as Experian) can only communicate with banks via the Open Banking Directory – and companies must be regulated to be enrolled on the directory.
Access to your account is given for 90 days at a time – after which point you’ll have to give your permission again if you want Experian to continue to be able to access your current account information. You can rescind your permission at any time.
Worries about how your data will be used are particularly pertinent given the comments Information Commissioner’s Office (ICO) had about the three major UK credit reference agencies last week.
The ICO’s two-year investigation into Experian, Equifax and TransUnion found ‘significant data protection failures’ at each of the companies, and has specifically given Experian nine months to make further changes before it may face further action.
You can find out more about this in our dedicated story, which outlines five things you need to know.
Could my credit score go down as well as up?
Experian says the current account information used for Experian Boost will only have two outcomes – your credit score will either improve or it will stay the same. It says that there are no instances in which your score will be reduced.
Your score also won’t improve if you already have the highest possible credit score.
- Find out more: credit reports – all you need to know
Other ways to improve your credit score
If you can’t improve your score through Experian Boost, or don’t think it’s for you, there are plenty of other ways to improve your credit score. These include:
- Making sure you’re on the electoral roll Lenders use the electoral roll to confirm your address for any credit applications, so if you’re not registered you might find it hard to get accepted for products.
- Ending financial associations with ex-partners If you opened a joint current account with an ex-partner whose credit rating is worse than yours, banks may also look at their credit rating when you apply for a product. If you’re no longer together, make sure you ask all credit reference agencies to break this financial link so their financial situation doesn’t affect you.
- Keeping your credit usage low Aim to use no more than 50% of your available credit, to show prospective lenders that you’re effectively managing your current budget – seeing this will make them more likely to offer you more credit.
- Making the most of your rent payments Signing up to Credit Ladder can help private tenants improve their credit score. The third-party company lets Experian know when the tenant pays rent, which means lenders are able to see that you are capable of paying important bills on time.
Find out more: how to improve your credit score
What is open banking?
Open banking has been around since January 2018, when the Competition and Markets Authority (CMA) forced nine major UK current account providers to open up their data to enable mobile and web applications to access it, with your permission.
The aim of this was to encourage innovation and competition, by making it easier to compare and switch financial products and accounts.
Open banking shares open application programming interfaces (APIs), which is deemed as being much more secure than the other option of ‘screen-scraping’. This is where some services ask for your bank login details, which then allow them to collect the necessary data and could expose you to fraud.
Before granting access to your open banking data, always be sure to check whether the firm appears on the list of regulated open banking firms; you can check out third-party providers on the Financial Services Register.
- Find out more: open banking – sharing your financial data