No Credit Score? No Problem, You Might Just Need a ‘Boost’

First-time home buyers often have an issue with their credit score, not because it’s bad but because it’s non-existent. No worries you’re not alone, somewhere close to 50 million adults do not have a credit score. Nevertheless, an acceptable credit score is crucial if you plan on applying for a mortgage.

Before you begin the home buying process, check out your credit score. Your score will be a major factor in determining your interest rate; the higher your score the lower your mortgage interest rate. Be aware that credit score(s) or the FICO score you might obtain online will differ from the score that lenders use to qualify you for a home loan. Mortgage lenders use an aggregate of scores from all three major reporting agencies; Equifax, Experian and TransUnion. The most accurate score will be obtained by contacting a mortgage lender. Interview several loan originators to find one that you are comfortable working with.

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If you’re one of the millions of people who have limited or no credit score, read on. Fixing your score might be easier than you think.

Does Your Credit Score Need a ‘Boost’?

According to the Consumer Financial Protection Bureau (CFPB), in 2017, an estimated 26 million Americans had no credit history at Experian, Equifax or TransUnion, the three largest credit-rating bureaus, and another 19 million were considered inactive due to not enough recent history to generate a credit score.

And without a credit score, access to loans – such as a mortgage – is virtually impossible. That’s why new ways to develop a credit score, such as the recently launched Experian Boost platform, are giving lenders different avenues for assessing a borrower’s credit history and determining a credit score.

Experian Boost enables consumers to add their utility and cellphone payments to their credit reports, enabling those without a traditional credit history to demonstrate that they are financially responsible.

Experian states in a recent USA Today article that the tool is the first of its kind and provides people an immediate way to prove that they are creditworthy, something that traditionally takes months to do. Experian Boost will be most helpful to those consumers with “thin” credit histories; in other words, those with less than five accounts and FICO credit scores between 580 and 669 will benefit the most, according to Experian.

Here’s how Experian Boost works: Consumers give Experian permission to access their online bank accounts in order to identify their utility and telecom payments. Once consumers confirm that this information is correct, it is added to their credit histories and a new credit score is instantly generated.

Important to note, while Experian Boost will work with the credit scores most commonly utilized by lenders, if the lender relies on a TransUnion or Equifax credit report, your approval chances will not be improved.

According to the USA Today article, Experian expects that two-thirds of consumers will see an improvement, and 10 percent of people with thin files will now have a score.