Right now, your banking habits — how often you deposit money, your account balance, overdrafts — do not affect your credit score. In fact, the three big credit bureaus can’t see and don’t know about such things.
But all that might change this summer.
Experian is working with a data company called Finicity to test a new credit scoring system they call Ultra Credit Scores. If they like the results, then they may roll it out nationally as early as this summer.
How Ultra Credit Score Works
If you give Experian permission, it will access your bank account to collect additional data for credit scoring purposes. What they want to see is no overdrafts, at least $400 as an account balance average for three months, and consistent deposits going into your account.
For example, if your employer automatically deposits your check every two weeks, that’s good. On the other hand, if you deposit your own checks and do so sporadically because you keep cash out for spending and don’t always get to the bank right away, then that is deemed as inconsistent and won’t gain you points.
If you have a nice savings account, that is good. If you have an occasional overdraft, that will hurt your score.
This is all new. Right now, the credit bureaus do not have access to your bank records.
Invasive or a Good Idea?
The idea behind Ultra Credit Scores (so they say) is that it will help young people starting out who don’t have much credit established to gain a good score. But hold on!
If you turned 18 yesterday, you can build a top tier score simply by following best practices without letting the credit bureaus spy on your personal banking habits. The same principle applies to older adults who have thin credit. Start today and build a good credit profile for yourself. It’s not hard!
I suppose if you have thin (not much) credit and you’re in a super hurry to buy a house right now, then the Ultra Credit Score system could help you. Frankly, I think there are a whole lot of Americans who prefer to keep their privacy and will deem it invasive.
Don’t Worry: They Can’t Spy If You Don’t Give Them Permission
Experian cannot access your banking information if you don’t give them permission, so don’t freak out: you are still in control.
Also, Experian is the only one of the three credit bureaus who is testing Ultra Credit Scores. If it ends up bringing them more revenue, then Equifax and TransUnion might follow suit; at this point, we don’t know.
Do You Want to Ensure Yourself of Having Top Tier Credit?
All the information that the professionals know about getting that 740 to 800 credit score is revealed in Build and Protect Your Credit Like the Pros. You can take a look here.
With a top tier score, you will save money on insurance premiums, interest rates, and favorably impress employers. $8.99 ($5.99 Kindle) is a tiny amount to spend to save hundreds and even thousands of dollars.
Thank you for reading my post. I hope you will share it on social media so others can learn about the new credit scoring system.
Some accounts influence your credit score more than others. When you think about it, it makes perfect sense.
Having a $300,000 mortgage is a greater responsibility than having a credit card.
Here is the order of importance/influence of type of account:
- Mortgage loans give you the most points. Always pay your home loan first and foremost. No exceptions. If you get in trouble and can’t pay all your bills, pay your mortgage on time, every time. Protect your home and your credit.
- Installment loans such as auto loans and student loans. An installment loan has a set payment and ending date. These count second for influence and importance.
- Revolving credit cards. This is ongoing credit. It is of least importance, but it is still important. Pay on time if you want a good credit score. If your score is 800 and you have one late payment on a credit card, your score can plummet by 100 points.
- Hard money loans are horrid and will negatively impact your credit score. Avoid hard money loans. These are finance company loans, cash advance loans, and payday loans that carry a high interest rate. They are rip-offs. They hurt your credit score, even if you pay on time, because only people who are “hard up” take a hard money loan.
When you understand credit, you are not at the mercy of the credit bureaus — you are in control. Create a good credit history and earn a top tier score. That way, you will save tens of thousands of dollars on everything from your mortgage to your insurance premiums. And, gain self-respect and the respect of the financial community.
Coming this fall, my new book, Build and Protect Your Credit Like the Pros. More information coming later, and not to be missed. Feel free to subscribe. I post about once/week.