Experian is rolling out a new program that could let you rig your way to a better credit score. It won’t likely impact your ability to work with Arizona hard money lenders, but there’s some chance it could actually harm your ability to get a loan with good terms with other lenders.
If you haven’t delved deeply into credit scores before, you may be surprised to learn that you don’t have a single score. You have several. There are three big credit bureaus (FICO, Experian and Equifax) which gather data related to you and financial habits, then provide some type of score to help financing companies determine whether you’re a safe borrower or not.
Each assigns you a numerical credit score using an algorithm. Most credit reporting models are based upon FICO’s model, so your credit scores will likely be similar across all three. However, each is unique and sometimes one receives different information than the others, which naturally makes the outcome different too.
When you apply for a loan, the financing company may pull a report from any of them or all three. However, with FICO, decisions are purely based upon the credit score. If a company says you need to have a 700 to qualify and you have a 699, you’ll be denied no matter the reason. With the other two, a full report containing things like open accounts and late payments is provided, so financing companies can take circumstances into account if they so choose.
Historically, there’s been nothing a person could do if he or she had rotten credit—at least not quickly. If your past was problematic or you hadn’t established credit, those were indicators you might not be a safe bet. That makes sense. You’d have to spend years building or rebuilding to get credit from a traditional finance company. Arizona hard money lenders have always been a bit different in this respect, simply because your credit score is not a major factor in the decision to lend.
If You Can Pay at Least Some of Your Bills on Time, You Can Game the System
Experian is now going to let you cherry-pick some of what appears on your report. Under the new program, Experian Boost, you’ll be able to link Experian to your bank account and it will pull data on things like phone and utility bills. Then, it will show you each bill it can count, let you know how it will impact your score, and allow you to pick which ones to include in your score. If you decide you don’t like it, you can shut it off. While this won’t undo a bad credit history, including bills you’re a good payer on can demonstrate creditworthiness and show you’ve had credit for a longer period of time, thus potentially increasing your Experian score and getting you approval with companies which prioritize Experian. Again, Arizona Hard Money Lenders won’t necessarily care about this. The majority use a FICO score and, even then, it’s the value of the asset you’re borrowing against that matters most.
Experian’s shift could spell danger for the future of lending.
As a consumer, you’re probably excited about this change because it could be an easy way to instantly improve your credit score. Therein lies the problem for financing companies and perhaps a few Arizona Hard Money Lenders who break from the norm. While Experian says this does not change its predictive abilities, there’s some chance financing companies may stop trusting Experian or require higher scores if time proves otherwise.
Level 4 Funding LLC
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Arizona Tel: (623) 582-4444
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Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.