Is Better Credit Worth Exposing Your Bank Data ?
America’s credit bureaus haven’t exactly covered themselves in glory when it comes to protecting your private data. So you might well be skeptical about two new credit-enhancing products that require not just credit information but also access to your bank accounts.
Experian and credit scoring company FICO introduced UltraFICO last year as a way to elevate credit scores based on how people handle their checking, savings or money market accounts. UltraFICO currently is in a pilot phase and expected to 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. The positive bill payment history can add points to certain credit scores, but people have to link their bank accounts so Boost can scan for those payments.
Both free products are aimed at people with “thin” credit reports — which Experian defines as having fewer than five credit accounts — and UltraFICO may help those with damaged credit, as well. For Boost, people have to sign up for a membership, while UltraFICO would be offered by lenders to applicants who might otherwise be turned down or get higher rates.
SHOULD YOU TRUST A CREDIT BUREAU WITH YOUR BANK ACCOUNT?
Both products get bank account information from data aggregator Finicity, which promises “bank-level security,” including “best in class” third-party security certifications and regular audits by 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 the bank account information, including login credentials and passwords, that must remain in a database for at least seven years for regulatory reasons.
Now, Experian is not the credit bureau that exposed 145 million people’s data in a massive breach two years ago. That was Equifax. But in 2015, Experian reported a breach of the same types 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, Experian’s site exposed the personal identification numbers needed to thaw credit freezes.
You don’t have a choice about being in a credit bureau database. Information about you and your credit accounts is reported to the bureaus whether you like it or not. With bank accounts, you typically still have the option of choosing who gets access — and you should choose carefully.
EXPERIAN BOOST AND ULTRAFICO AREN’T FOR EVERYONE
Boost and UltraFICO offer the tantalizing prospect of instant gratification — more credit score 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 might creep up only a few points, or none at all. The product is aimed at people with bad-to-fair FICO scores of 580 to 669. (The average U.S. score is just over 700, or solidly in the “good” zone on FICO’s 300-to-850 scale.) Even then, Experian says only 5% to 15% of the Boost users who saw any increase had a big enough jump to move them up a whole category (from bad credit to fair, or from fair to good).
UltraFICO, meanwhile, targets people with scores from the high 500s to the low 600s. Those most likely to benefit keep a cushion of at least $400 in their bank accounts and never let balances drop below zero. If your bank account is constantly on fumes or dips into the red, you are unlikely to see improvement in your scores.
THERE ARE OTHER, BETTER WAYS TO BUILD CREDIT
The other big drawback: Both Boost and UltraFICO work only with Experian data and certain scores. (Boost works with FICO 8, FICO 9, VantageScore 3.0 and VantageScore 4 .0; UltraFICO works only with FICO scores.) If your lenders use other scores or other credit bureaus — and many do — you’re out of luck.
By contrast, you typically can build your scores at all three bureaus by:
¯ Being added as an authorized user to someone else’s credit card.
¯ Using a credit-builder loan, offered by many credit unions and at least one online lender.
¯ Using a secured credit card, where the credit limit is typically equal to a deposit made with the issuing bank.
The goal of giving more people access to affordable credit is certainly a worthy one. But before you hand over more data to a credit bureau, you should be confident you don’t have better options — and that the benefit is worth the risk.