FICO never seizes to impress us. Today, Merrill Chandler talks about some interesting tactics and strategies that are being used by one credit bureau and by FICO to create a more inclusive credit score. The question is does that make you more fundable? Merrill gets down on UltraFICO and Experian Boost, which is offered by Experian but uses FICO. He also reveals what appears to be an awesome opportunity for one credit bureau.
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UltraFICO & Experian Boost
In this episode, we’re going to be talking about some interesting tactics and strategies that are being used by one credit bureau and by FICO to create a more inclusive credit score. The question we’re going to ask is, does that make you more fundable? We’re going to take a look at a couple of UltraFICO that is offered by FICO. We’re going to be talking about Experian Boost, which is offered by Experian but uses FICO.
We’re talking about what appears to be an awesome opportunity for one credit bureau and FICO to bring more people on board and make your credit score go up. Before we start this, I want us to be clear that I’ve been teaching in every single one of our shows. For all of you bingers out there, we don’t care about the score if it doesn’t make me more fundable. Those are the glasses we’re going to be using to filter this information. Experian is saying, “Only Experian can raise your FICO score instantly.” Some of you already see the problem here. How many scores are they talking about? They’re talking about one score. The funny thing is that the score is what’s called Experian Boost. They say, “Get credit for your phone and utility bills. New credit scores take effect immediately and it includes free Experian credit report plus a FICO score.”
When you get a free FICO score with a credit report, what FICO score do you get? You get the open-access free what we call the FAKO FICO. It’s the one that you’re going to get from Bank of America, Wells Fargo or Credit Union. It’s the marketing score. It is not an actionable score that an auto dealer, a mortgage broker, unsecured credit card business, credit lines are going to use. Let’s take a look at what they’re saying FICO Score 8. It is the most popular of the marketing scores. If it’s only Experian, is that good news or bad news? If it’s only Experian that’s “raising” your FICO score, then that means they’re not using TransUnion data and Equifax data. It’s not helping. They’re marketing to people who are unaware. If you’re this far in the blog, this may be your first one but for most of us, if we’ve read more than one of these blogs, you’re already in the know. You’ve got the insider secrets down. We’re putting on our glasses to filter the advertising, to suss out the facts here. Everybody’s been sued one time or another for all of this, let’s read the fine print. Credit score calculated based on FICO Score 8 model.
Your lender or insurer may use a different FICO score than FICO 8, or another type of score altogether. They’re giving us the exact same disclaimer data saying this is the unweighted FICO 8 marketing score. It is not a score that’s based on the lender industry-specific scores that we’ve discussed in previous episodes. If you subscribe to Experian Boost, it’s going to allow you to get credit for your phone and utility bills. That’s what it’s putting in there. What did we say when we talked about business credit reporting? There were eCredible and other outfits out there that say, “We can improve your business credit using your phone bill, utilities, cable.” Is Chase going to give you a $50,000 business line of credit based on your phone and utility bill reputation? I’m going to say no and so far, nobody has countered this. Nobody from Experian called up and said, “Merrill, you may want to correct this because lenders and auto dealers are using this score all the time because they’re not.” They’re saying, “Look at all the points that are being boosted.” Experian Boost is creating all these things. Austin, Texas, fifteen points but they’re selling score, not fundability.Credit bureaus dangle that shiny object in front of the borrowers so that they don't know what they’re measuring. Click To Tweet
How many times have I said, “Let’s dangle that shiny object in front of the borrowers so that they don’t know what we’re measuring?” They tell the truth, 90% of lenders want to see FICO scores. Of course, they do but we want to know that Experian, TransUnion, Equifax are all using the same data. FICO scores present a bigger picture. You need six months of credit history to get a FICO score. That is true. Because you have a few months or even a few years of data on your utility payments, are they going to give you a $20,000 credit card or business line of credit? They’re framing everything in the terms of score, not fundability, not access to capital, not approvals for the types of credit that we’re always looking for, which are business lines of credit, business loans, commercial loans. Raise your FICO score. This is the truth. You don’t know that it’s true until we dissect this whole thing. It’s Experian data and it’s the FICO 8, that is one score. The problem is the entire universe of scores is being ignored. Connect the bank accounts you use to pay your bills, choose and verify the positive payment history you want to add to your file.
Remember when we’re talking about the business and we said, “These business accounts are letting me pick my positive payment history. What about negative payment? I’m late on my rent or I’m late on my cell phone, but my electric bill is always on time.” They’re saying when you choose here, they’re using an electric company as positive payment history. I stand by what I said in business reporting. I stand by it when it comes to Experian Boost or anything else. If you get to choose it, it’s not going to help your fundability. I’m assuming it makes sense to me that it never will because you’re skewing the picture. You get to choose and verify the positive payment history you want to add to your credit profile, and then your scores boost immediately. Your water bill, electric bill, utilities, cell phone, unlike credit repair companies, this is true, Experian Boost is free. What good does it do? I can’t know this yet and it’s on my docket for my conversations with FICO. With total transparency, I do not know the answer to this question. What we need to understand is that if it’s only one score and one bureau, then does it have any impact whatsoever? They’re selling a score.
If you subscribe, Experian score is going to go higher and create more range between your Equifax and TransUnion. What does that mean? If there’s too much diversity, then automatic underwriting is going to throw you out into manual underwriting. Some human beings can check the data points. I promise you, Chase business is a commercial loan for your multifamily, it’s not going to look at your Experian Boost. The Experian data boosting your FAKO FICO score. A FICO score supports everything that I’ve ever said. Experian is legit but there’s no TransUnion and Equifax yet. Even if it does, Experian and Equifax are not going to help because it’s not kind-lending. Your utility bill and a $50,000 business credit card or even a regular credit card are not going to have a significant impact. Get credit for your phone or utility bills, raise your FICO score and get a free Experian credit file. That’s it for Experian Boost.
Top to bottom, Experian Boost is simply a strategic alliance, a joint development between FICO and Experian to add additional data points that are trying to bring in more people and teach them about scores. I’m not against anybody learning how to improve their credit scores. If you’re not interested in fundability, then your score is like any other trophy. It sits up on the shelf. If you’re interested in your score reflecting a profile that lenders will lend to, then Experian Boost is another marketing ploy. It’s leveraging new and exciting technology that doesn’t help your fundability.
Let’s go to chapter two in this episode about another Experian/FICO relationship called UltraFICO. You know through and through, I’m a fan of FICO, I love FICO. FICO is straight-up honest in what it’s teaching and offering here. It raises your score using data that lenders are already getting from other places because it’s part of the lending underwriter software. It’s a great picture and lots of people living their lives. How do we have this much fun? What we need to increase is our score. Your data, your UltraFICO score, you are in control. It says, “You can unlock more credit opportunities for hardworking people.” You empower your FICO score by simply linking your checking-savings money market accounts. They want to know how much traffic but lender software that’s going to approve you is looking at your traffic.
That’s through early warning systems or early warning services. There are other databases that we’ve talked about in the bootcamp and in my book that are monitoring those things. All they’re saying is throw those checking, savings and money market accounts into your score and we can raise your score. You have to opt-in. They’re addressing seven out of ten people who have kept positive balances on their accounts. They could see a higher score than their traditional credit score. Some people don’t even have enough credit history to generate a FICO score. If you don’t have a credit history, you’re not going to get lending. We need to build a profile that is a fundable profile. Remember the three pillars of fundability. A qualified fundable borrower profile, your personal profile, a qualified fundable entity, and the borrower behaviors that build relationships with lending institutions that trigger all the positive results that a lender wants to lend to you. If you don’t have a credit history that does that, then getting your bank account information is not going to help.
The early warning services that banks subscribed to already have this information. It’s not calculated in your FICO as we learn here. Unweighted FIKO FAKO score impacts your lender score. We want to do what impacts positively our fundability. How it works is with UltraFICO, you’re empowered to leverage your checking and savings account to add to it. Sign up. What it does is, it checks out the length of the time your accounts had been open. There are other databases that lender software uses to do exactly that. The recency and frequency of your banking transaction, what do we call that? Traffic, dollars in, dollars out. If evidence of consistent cash-on-hand, that’s your average daily balance. For my students and clients out there, those of you that have been to the bootcamp, you know what they’re looking for in that bank grading system and a history of positive account balances. From the bootcamp, from my book where we need to stay away in every way and keep positive balances and never go into the non-sufficient funds. Go below zero or check guarantee credit lines because we’re not going to get positive juju from that. The cool thing is UltraFICO is measuring all this but it’s measuring it to create or add to a score. The thing is FICO is not the one who cares about this.
Lenders are lending on this. Remember how I said FICO in its own words is in charge of a rate and term, maybe and in many cases, the limit or loan amount. That’s what the FICO score does for you, not the approval. All of these things that we’re reviewing, every one of those is the one that’s taking care of that. I want to make sure that we are all in play here. You have to opt-in and then they’re collecting the data. Let’s take a look at who else is involved in this process. See where it can take you to trust FICO? Here are the joint ventures. It’s a joint financial inclusion partnership of FICO, FinTech pioneer Finicity and the global leader in consumer credit reporting, Experian, with no mention of Equifax and TransUnion. That means that if you did opt-in, it’s not going to matter but you’re going to have a differential and your score range between your highest low score is going to increase. Remember, I say I don’t care if you save 0.5% on an auto loan from a credit union. If that credit union only reports to one bureau, it’s going to damage your profile.Go with what puts money in your pocket so you can grow your business and create time, money, freedom. Click To Tweet
In my world, I’m going to support you in doing what you need to do to take care of your family and loved ones because cash is king. We’ve got to take care of that nest egg. If you’re asking me what to do, I’m going to tell you that 0.5% savings by going to a small credit union is not worth a single penny of the savings because it’s going to cause a difference in range. We want to get down to that 0 to 5 points max, 0 to 10-point difference between the highest and lowest scores. Signing up here, Experian is going to be the only thing that’s affected. As I’ve shared with you, it’s affected negatively. I don’t know this but I’m going to share it with you anyway because half of fundability optimizations started out as me connecting dots and then it got proven and proven both in client experience, student experience and from FICO itself. It’s not going out on a limb. The entire thing that you have learned started out with intuition, connecting dots and seeing patterns. This is marketing to build more trust in scores.
I’m down to the single mom in Louisiana and the hardworking steelworker in West Virginia. I’m not saying they don’t deserve to have a good credit score. I’m saying that let’s empower them with scores that are going to get them their first home, first car and first credit card because I am not aware other than FinTech pioneer Finicity. I’m unaware of how Experian Boost and how UltraFICO are being used by lenders. The lenders that I work with and interview and the people that I’m in touch with in everything that I’m doing, not one of them use UltraFICO or Experian Boost as part of their underwriting guidelines. I’m going to go with what puts money in your pocket so you can grow your business and create time and money freedom. Nothing else. That’s your deep dive.
Both of these, Boost and UltraFICO, use Experian data. In my research, there are no plans on how to expand that because the reasons why Experian got in there is they want to use their data and create more opportunities there. Maybe there’s a sunset clause on that deal. After a year or two, the other bureaus can come in. All I know is that FICO is out to sell scores but lenders approve funding. How many times have you known me to say it in the different episodes that we’ve done? Just like detectives in a good detective show, Murder Mystery, follow the money. Here, follow the payoff. Who is selling and why?
I love FICO. God bless them for making things broader to build score and awareness of the importance of a good credit profile. Not one or any of Experian’s language or any FICO’s language talk about using this as a stepping stone to build a better profile that lenders will lend to. They’re being inclusive but they’re not educating these susceptible borrowers, these people who don’t know the difference between fundability and scores. They’re not saying it but borrowers are saying, “If I can get a better score, I can get a car or I can get a mortgage.” There will not be a Fannie-Freddie mortgage in the near future that will ever use these scores as part of their funding.
When that becomes different, if you find something different, I’m willing to be wrong. Some of this stuff, I want to be wrong because I want there to be major social responsibility from the people who are in charge of this. I want there to be more for all of us. I want our lending partners and our FICO scoring partners to educate us across the board about all of it. You and I are left to ourselves to do the math, observe the results and see what’s happening out there. I love that they took on Credit Karma and that’s the free boost that they’re doing to get this free score to help and still use a FICO.
It’s a FICO FAKO score. That FICO 8 is not an auto score nor mortgage score, and it’s not an unsecured bank card score. I love it when you join me. Keep binging, keep committed to the power you have to make a difference in the lives of your circle. Educate them, share this blog, share this everywhere you can so people know what to watch for. In every way, I want you to be fundable but more importantly, I want you to be able to educate and show up for your loved ones in a way that will help them stop stepping on the funding landmines. You and I are going to get fundable together. Fair enough? We’re knocking out of the park. Be well.
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