Consumer friendly credit score trends
A low credit score can hurt your ability to take out a loan, secure a good interest rate or increase the spending limit on your credit card.
Some reasons for a low score are out of your control — such as medical debt or a lack of credit history.
Credit rating agencies are working to improve access to credit by giving people more time to pay medical bills before the debt appears in reports, and by removing other debt completely. They’re also making it easier to count rent, utility payments and other recurring bills — a boon for those who need credit the most.
Here’s what to know:
What’s happening with medical debt?
After conducting industry research during the pandemic, the three mostused credit rating agencies found that consumers with medical expenses were just as likely to be creditworthy as those without.
Effective July 2022, paid medical collection debt is no longer included on consumer credit reports, and the time period before unpaid medical collection debt appears is now a year, up from six months. That gives people more time to pay off the debt.
In the first half of 2023, Equifax, Experian and TransUnion will also remove medical collection debt under $500 from credit reports.
How else can I increase my credit score?
Although consumers have long been able to add rent and utility bill payments to their credit files, the bureaus have made these additions easier and less costly in recent years.
Experian, for example, has an option for consumers to opt in to a service, Experian Boost, that counts these kinds of payments without charging a fee. In some other cases, companies may charge the renter or landlord for the trouble of filing the additional information in credit reports, since it isn’t automatically included as a matter of course. Those who use the program often see an increase in their scores.
“You’re making a payment once a month for a service you receive — very much like getting a loan,” said Rod Griffin, financial health advocate at Experian. “What we found in our research was that those kinds of pieces of information do indicate that a person may be a better credit risk than their report might show if they have very little credit.”
For people with thin credit files or scores below 680, Experian sees an average increase in the neighborhood of 19 points, Griffin said. About two-thirds of people see an improvement in their scores, but the tool helps even those who don’t build a longer credit history, he said.
To use the tool, you give Experian permission to capture your monthly payment history and bank information — whether that’s a cellphone plan, water bill, streaming service subscription or rent.
Tech companies that provide similar services to Experian Boost, either at low or no cost, have proliferated.
“That is now one of the No. 1 things we encourage people to do,” said Silvio Tavares, chief executive of VantageScore, another provider of national consumer credit scores. Like FICO, VantageScore uses the credit reports compiled by Equifax, Experian and TransUnion to calculate a rating of creditworthiness using its own algorithm. “If you’re engaging in creditworthy behavior — like paying rent and utilities on time — you want to include that.”
How do I opt in?
To include alternative credit information on your report, you can opt in to Experian Boost or Ultra FICO by going to the companies’ websites and granting permission for them to access your checking, savings or money market accounts. This will allow the credit bureau or scoring company to analyze your spending, saving and consistent payment histories. Other financial tech platforms provide similar services, but these two options do not charge fees.