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Bulking up a Thin Credit File · Talking FACS

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  Welcome to Talking FACS, what you need to know about family,
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  food, finance, and fitness.
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  This nationally recognized, award-winning podcast is hosted by the University
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  of Kentucky Family and Consumer Sciences Extension Program.
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  Our educators share research knowledge with individuals, families,
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  and communities to improve quality of life.
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  Hello, and welcome to Talking FACS, what you need to know about family,
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  food, finance, and fitness. I am your host, Mindy McCulley, Extension Specialist
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  for Instructional Support with Family and Consumer Sciences Extension at the
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  University of Kentucky.
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  We are housed in the Martin-Gatton College of Agriculture, Food, and Environment.
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  Thin might be something that many people aspire to be, but when it comes to
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  our credit file, that might not be exactly what we want it to be.
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  So my guest today is Kelly May, Senior Extension Associate for Family Finance
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  and Resource Management, and she is going to share with us about bulking up
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  a thin credit file. Welcome, Kelly.
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  Thank you for having me. What a great intro. So what exactly is a thin credit file?
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  Oh, it's such a good question. So if you don't yet have a credit file at all,
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  so we're talking about credit reports, right?
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  Your credit, people talk about their credit scores, but it's not really the score, it's the report.
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  So if you haven't had credit before, you might not have a credit file at all,
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  or sometimes they call that credit invisible.
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  Or you might have a file, but your score may not be as high as you wish it was.
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  So maybe you haven't had much credit, it and it just hasn't had time to build
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  yet, so there's only one or two things in there and they can't tell much from it.
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  Or maybe you've had a few things in there and you'd like to do a little work
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  to improve how that shows up in your score.
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  So there are several tools available that can help you do this.
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  So you can bulk up a thin credit file or use these tools to improve the score that you already have.
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  Lots of times we think that if you haven't had credit or if you haven't had
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  an experience with credit, then you're going to start out at the top.
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  But that is not how credit works, right?
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  No, no, it's going to base on wherever you start, it's going to start with that first account.
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  And it does take a little time to build. So there are two different types of credit scores.
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  There's the FICO score and the Vantage score. and we're going to be talking
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  about tools that will help you with your FICO score because that score takes
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  at least six months to build.
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  And so if you're trying to apply for something right away and you haven't had
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  a chance to build that file yet and they happen to use the FICO score,
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  you may need a little help.
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  Exactly. And this is something that it's really important that we talk about,
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  especially you said, if you're getting ready to do something like like buy a
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  car or buy a house, then you really need to have some of that established credit
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  before you go to make those transactions.
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  So you've shared with me a term that I was unfamiliar with, which is ultra FICO.
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  What is ultra FICO?
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  Ultra FICO is a free service that is offered by the people who run and generate
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  the FICO score, and it uses additional information that you agree to share to
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  generate a special score.
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  So you would go to a secure online portal and you would link your bank account,
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  such as your checking or savings.
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  And a lot of people don't realize that your credit report does not look at your
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  income. It does not look at how much money you make or how much money you have in savings.
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  It's not weighing whether you should have debt.
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  It's just tracking all the debt that you have.
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  So using Ultra FICO, you can actually tap into a checking or savings account
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  so that your banking activity can be weighed in with your credit report data
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  because that is not usually included in your report.
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  And so the Ultra FICO score does not replace your traditional credit score,
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  and it doesn't become part of your credit report.
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  It's just like a bonus score that can help you in the short term when you're
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  trying to do something new. so you can utilize this opt-in feature to share
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  it with the lender that you're trying to get credit with.
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  So this score can be helpful if you have consistently kept positive balances
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  in your account that are at least $400 for a period of time.
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  So if you've had a bank account and you've used it regularly,
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  you can actually link that up to help your score sound a little better.
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  So it's not looking at the type of banking that you do.
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  For example, if you rent from an individual and they don't report to credit,
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  that's not going to show up in your ultra FICO.
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  It's just dependent on your bank account. Is that correct?
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  It ties your bank account in with everything else that's in your score.
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  So whatever you already have as far as credit will be counted also,
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  but this will help move Move it up a little bit if you've got good banking habits.
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  Okay. Okay. So then the next term is Experian Boost.
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  And I'm guessing that that is related to one of the major credit reporting bureaus. Yes.
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  Exactly. So there are three major credit bureaus, and that is Experian,
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  Equifax, and TransUnion.
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  And so Experian has decided to offer its own program.
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  So that one's only available through Experian. And they call it Experian Boost.
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  And so they will look at bills that you may pay monthly that you would like
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  to count. So if you have a history of regularly paying bills that would qualify,
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  and almost all the bills we pay will qualify.
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  So their list includes phone, rent, utilities, television, even streaming services,
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  insurance, internet, all sorts of different bills that we might pay.
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  And as long as we pay those regularly, counting those in with your score temporarily
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  can help boost your score.
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  So that's why they call it Experian Boost. and it
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  is done in a similar way to the other one and
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  so you go to this online portal that's secure and you
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  connect your bank account that you use to pay the
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  bills so that you can say yes this bill yes this bill and it can search those
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  through your past statements to see that yes you have paid those on time so
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  unlike the ultra fico that just looks at your banking habits this one actually
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  looks at bills that you pay on a regular basis.
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  Exactly. But that one is only available through experience. It's only through experience.
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  Okay. It can be a little confusing because different lenders can use the different
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  credit bureaus. So they don't have to use all three.
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  They can pick and choose which one they want to use.
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  So it may help to know before you sign up for either of these,
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  what it is you're applying for that you would like to show an improved score
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  for, so that you can maybe find out which of these services might be most helpful.
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  So, the Ultra FICO should make a difference on all three credit bureaus, is that correct?
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  Yes, if they use the FICO score. Now, if they use the Vantage score...
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  We haven't even gotten to Vantage yet, have we?
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  Okay. So there are two scoring models that we use in the U.S.
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  FICO is one of them, and the other is called Vantage Score. And so I mentioned
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  at the beginning that FICO takes at least six months to build up, and longer is better.
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  So the longer you have your accounts open, sometimes the better that will reflect
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  on you as long as you've been maintaining them the way you're supposed to.
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  Vantage scores a little bit sooner. So the Vantage score can come into play
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  one month after a credit account is open.
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  So they score theirs a little bit differently, and it allows them to create
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  that score a little bit faster.
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  The trouble is most of the time, consumers have no way to know in advance whether
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  a lender is going to use Vantage or FICO.
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  But if for any reason your credit is denied, the lender will disclose the score
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  and everything that led to that outcome.
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  So you will find out, if you don't get the credit, you will find out for sure
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  what happened and where they got that information.
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  So finding out what your credit file has in it, when you go to annualcreditreport.com,
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  which you can do once every year.
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  They have made the frequency permanent. So during COVID, they made it so you could get one a week.
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  And the credit bureaus have decided that's a good policy.
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  And so they have extended it a couple
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  of times and they actually made it permanent just about a month ago.
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  Even though you can check your credit file weekly, that might be a little overwhelming
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  for some people and it's probably not necessary.
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  Right, I would do it at least once a year.
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  It's good to know what's in your file, and it's a great way to protect yourself
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  from identity theft, to make sure there's nothing in there that shouldn't be in there.
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  And it can help you to apply for things in the future just to make sure that's
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  cleaned up, that there's nothing lingering.
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  Like, say you've paid off an account, but you want to make sure that it shows
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  that you paid off that account, because that can only help, right?
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  Right. But you know what it says, whether or not you're there.
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  If you see anything that's not right on your credit report, you can always,
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  always dispute that with the credit bureau and they will work to get that corrected.
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  So Kelly, once you have turned on this feature, either the Ultra FICO or the
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  Experian Boost, is it something that you can turn off?
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  We find that it's no longer beneficial. Yeah, you don't have to commit to it forever.
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  And it's, as I said, it's not part of your permanent credit report.
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  It is a separate score that you can tell your lender, hey, I've got this additional score.
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  And you can check that model to see that, yes, I am a good credit risk and you
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  should lend to me. So it is a temporary thing.
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  And if you decide you don't want it anymore, you can absolutely turn it off. And it is free.
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  Perfect. I was just about to say, and what does it cost? It costs nothing.
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  That is always good to know.
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  Kelly, is this something that everybody needs to do to boost their score with
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  UltraFICO or Experian Boost?
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  Not necessarily. It's a service you can use if you think it will help,
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  but not everybody's going to need this.
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  So if you have been taking care of your accounts, you may be just fine with
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  what you're already doing.
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  The goal of your credit score is not perfection. It's just to be as good as you can be.
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  So just like with anything you do with your credit, you need to be able to accept the consequences.
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  So if you sign up for these programs and you grant them access to your bank
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  account or to your bill payments, you know, they're going to see whether or
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  not you pay these things on time.
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  And that's what they're looking for is whether or not You pay on time.
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  So as with anything to do with credit, if you pay on time and you keep those
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  charges low, it's going to help.
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  So just keep that in mind when you're granting access for things.
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  So while these things can help pad your file, they're not a cure-all.
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  The best way to build and maintain good credit is to pay bills on time,
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  pay down the balances, and avoid new debt.
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  And if you have a fairly established credit file, they probably aren't going
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  to make a whole lot of difference one way or the other anyway, are they?
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  It just depends on what you're applying for and whether a point or two is going
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  to make a big difference.
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  If you're right at the edge of a threshold from being between fair and good
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  or good and better, maybe it would help, but not everybody's going to need this. Okay.
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  Kelly, thank you so much for this valuable information that I hope that our
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  listeners will be able to use in a way to enhance their understanding of their own credit files.
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  Fantastic. If you are just tuning in, you're listening to Talking FACS,
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  Thank you for listening to Talking FACS. We deliver programs focusing on nutrition,
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