No credit, no problem: Experian now lets you create your own credit file | Smart Change: Personal Finances

Sarah Hansen

If you don’t have a credit history, it may be difficult, if not impossible, to qualify for a mortgage or to obtain another type of loan. But a new program from Experian will let you build your own credit report from scratch, without going into debt or waiting months to build up a solid payment history.

Experian, one of the three major credit bureaus in the United States, recently launched a new program called Go that will allow people with no credit history to create their own credit reports.

Experian says the program will allow the 28 million “invisible credits” to access funding from major lenders and banks. Credit invisibles have zero credit reports, and Experian notes that an additional 21 million people have credit reports too thin to score.

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Why is a credit report important?

“Having access to credit is one of the most important tools for reaching some of the most important milestones in your life: buying a car, buying a house, getting a loan,” says Jeff Softley, president of consumer business. from Experian.

Experian, along with competitors Equifax and TransUnion, collects data from lenders to compile a credit report unique to you. This credit report includes your credentials, credit accounts (including credit cards and other types of loans), and payment history associated with them. Public records such as bankruptcies and foreclosures are also factored into credit scores, among other data.

All of this information is used to generate a credit score that can range between 300 and 850. Credit scores have generally tended to rise during the pandemic, and in 2021 the average credit score in the United States reached a record high of 716, according to FICO. Paying your credit card balance, loans, and other bills on time will help boost your score, while late payments or overusing your available credit (experts recommend using less than 10%) will boost your score. will reduce.

Lenders use credit scores to assess your reliability as a borrower. The higher your score, the more likely you are to qualify for favorable terms such as lower interest rates and premiums on all types of loans, from mortgages to car loans to student loans.

What if you don’t have a credit report?

Not everyone has loans of the type that are traditionally reported to credit bureaus like Experian. These consumers may be new to borrowing, or they may simply have chosen not to get credit cards or borrow money through loans. Therefore, they may be “invisible” to credit reporting agencies and not have credit reports. This problem tends to affect immigrants and people of color at higher rates than other groups.

Even though these consumers may be diligent in paying utilities, rent, and other bills on time, their lack of a credit report makes it extremely difficult for them to access traditional loan services.

“Living with no or limited credit history can be a significant barrier to financial opportunity in America,” Craig Boundy, CEO of Experian North America, said in a statement.

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How to create your own credit file

Experian says its new Go program can help solve this problem by allowing consumers to create their own credit reports.

Once consumers have created their report with Go (a process that takes about four minutes on average), they can use another Experian program, called Boost, to add positive payment data such as cell phone payments, utility payments, cable payments, and even Netflix or Hulu payments. to the report so that it is visible to lenders. Boost has been around since 2019, and consumers can use it to add the same alternative data to “boost” existing credit reports. The goal is to establish a history of on-time payments that can help bolster an otherwise thin or flawed credit report to help more people get approved for financing.

Experian began piloting the Go program in October, and more than 15,000 consumers have now created their own credit reports. The company claims that 91% of Experian Go users who added positive data to their reports with Boost received a credit score within minutes. The average starting FICO score for these users was 665 (a “fair” score, according to Equifax).

To create a report using Experian Go, you need to download the Experian app, sign up for a free subscription, and use a government-issued ID and selfie to authenticate the account. A social security number is required to use the service.

The Go program represents “the first time consumers have been able to not only create a credit profile, but also instantly obtain a credit score without going into debt,” Softley said. “This is a really important step forward in solving the problem of establishing credit for the first time.”

Of course, there are other ways to build good credit fairly quickly, even instantly. Making sure you pay all your bills on time (automate your payments can help), pay off debts, and become an authorized credit user on someone else’s account (like a parent’s) are good starting points. You can also consider opening a secured credit card or taking out a credit-generating loan.

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