SALT LAKE CITY — Behold your credit score. Until recently, if you didn’t like the number, there was nothing you could do to improve it instantly.

A new kind of calculation promises to change that, but it comes with a catch: Consumers have to let companies peer into their bank accounts to see their bill-payment history or balances.

This “alternative” credit scoring worries some consumer watchdogs, who fear that the system could wind up hurting the Americans who most need the help: people with poor or limited credit, or people with no credit history at all, the “credit invisibles.” Some also fear it could help people get credit they probably shouldn’t have.

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But proponents say that “consumer-permissioned” data mining, led by a Salt Lake City-based tech company called Finicity, is a game-changing means of helping people who might otherwise be shut off from credit and can help them get lower interest rates.

“You often hear the phrase, ‘You have to have credit to get credit.’ Credit building can be a challenge,” said Steve Smith, CEO of Finicity, which is working with credit-reporting agency Experian and analytics company FICO on their new alternative-credit offerings.

About 50 million Americans have “thin” credit files, meaning the files have four or fewer entries, Smith said. Another 25 million are young adults and recent immigrants who don’t have a credit score at all. These are the people most likely to be helped by Experian Boost, which incorporates payment histories of cellphone and utility bills into a credit score, said Rod Griffin, Experian’s director of consumer education and awareness.

Experian’s television ads, though, don’t say that a third of people who sign up won’t be helped by Experian Boost.

And some people are skeptical that any credit-score increase warrants the risks of giving any company, no matter how respected or secure, access to highly sensitive data. “I wouldn’t let any member of my family do it, and I wouldn’t do it either,” said Carolyn Warren, a mortgage broker and loan officer in Seattle.

The American consumer, however, increasingly demands speed in financial transactions; witness the success of Quicken Loans’ Rocket Mortgage, which promises a decision in about 8 minutes, thanks in part to Finicity software and instant trawling of information about assets, income and employment. Last year, Quicken surpassed Wells Fargo and Bank of America to become the nation’s largest mortgage lender.

FICO and Experian are betting that consumers will give them access to their bank accounts, too, if it means a better credit score.

But not everyone who signs up will benefit. Here’s what you should know before giving Experian Boost and other alternative-credit programs a try.

Potential for harm?

When consumers sign up for Experian Boost, they give the company permission to look through their bank statements for evidence of regular payments on cellphone accounts and utility bills.

Those payments aren’t part of the credit histories compiled by Experian and the two other credit-reporting agencies, Equifax and TransUnion, unless the accounts become extremely delinquent. That’s because utility companies have historically seen no benefit in recording and sharing the information, said Christopher Peterson, a law professor at the University of Utah who specializes in consumer protection, credit and banking.

About 1 million people have signed up for Boost since it debuted in March, Experian said in August. The company said then that about 6 in 10 users increased their FICO score by an average of 13 points, and that of those with poor scores who saw improvements, 66% moved from the “poor” to “fair” category.

Among people with “thin” credit files, meaning consumers who have four or fewer listings on their credit report, 87 percent saw improvement, Experian said.

Griffin, Experian’s director of consumer education and awareness, said the latest figures show an average improvement of 19 points. He calls Boost a “game-changing service” for consumers and said the service is free and won’t negatively affect a consumer’s rating. The company scans for utility payments every month, but the consumer designates which ones and can revoke access at any time, he said.

Another new option is UltraFICO, offered by FICO, formerly Fair Isaac & Co.

When a person signs up for UltraFICO, they grant the company access to their checking, savings or money market accounts. Balances are collected through Finicity, and FICO analytics compute a new score which may benefit consumers who have maintained a positive balance over time. A higher score may allow people to get credit they couldn’t get without the program or allow them to get better terms on a loan, the company says.

Talin Larson, left, a financial counselor for AAA Fair Credit Foundation, hands out certificates and other materials as he wraps up teaching a class called Spending Plan and Savings at the Salt Lake County Criminal Justice Services Center in Salt Lake City on Tuesday, Sept. 24, 2019. | Spenser Heaps, Deseret News

For Talin Larson, a financial counselor at AAA Fair Credit Foundation in Salt Lake City, Experian Boost didn’t help. After the Deseret News reached out to the financial-counseling service about Boost, Larson signed up on Experian’s website and said he saw no change in his credit score.

Larson said that although Boost didn’t help him, it might be worth a try for some people. After the Equifax data breach of 2017, security is always a concern, “but how often do credit bureaus get hacked?” he said. “People have become more aware and secure with their information, and I’m sure the credit bureaus have done the same thing, too.”

In the Equifax breach, the largest in history, the personal information of nearly 150 million Americans was exposed, including Social Security and driver’s license numbers. The Federal Trade Commission found that Equifax had failed to properly safeguard its data and ordered the company, in addition to paying more than $700 million in fines and penalties, to strengthen its security practices and to conduct security reviews every year.

However, Peterson, the University of Utah professor who is also director of financial services at the Consumer Federation of America, remains concerned about security breaches and identity theft and cites two other potential harms.

“People who are invisible, as they call it, tend to be disproportionately poor, probably a little less educated, and there is a higher percentage of people of color,” he said. People may sign up for the program, and the model may predict them to be a poor credit risk, especially if they make a few late payments. While Experian says their scores won’t go down, such information could be damaging if other companies obtain the information, legally or not.

Peterson is also concerned that information in a bank account may reveal that a person has, for example, less money at a certain time of the month, making them vulnerable to advertising from high-cost lenders. “What you’ve built is a targeting system to deploy predatory loans,” Peterson said.

“I’m not convinced that there are rules in place that clearly prevent that sort of use from some of these consumer-permissioned data sources. I’m not pointing specifically at Experian or UltraFICO; that’s just the general trend,” he said, noting that consumers often don’t read or understand permission-giving contracts they sign.

In fact, consumers’ understanding of credit and how it works is the lowest it’s been in eight years, according to a recent survey by VantageScore and the Consumer Federation of America. For example, 6 in 10 Americans surveyed this year knew that people have multiple credit scores, compared to 78 percent in 2012.

‘Meaningful’ improvement

Warren, the mortgage broker in Seattle, dislikes both UltraFICO and Boost, saying that even if a consumer gains points, it’s a “vanity score” that might not provide value since not every lender will see it. Each credit bureau comes up with different scores, and not every lender uses Experian.

Historically, the most reliable way to improve a credit score is to make payments on time and keep balances low. And it’s not hard to start that process right now, even with poor credit. “People can get credit cards with horrible credit. And as for auto loans, you can be one day out of bankruptcy and get an auto loan; they just want to see that you have income,” she said.

And Warren said that for young people without a credit history, “If you do everything right, you can have a really nice score in a short time; you don’t need to give up your bank account information.”

Ted Rossman, industry analyst for Creditcards.com in New York City, however, likes Boost, which he says addresses a “hole in the system,” whereby young adults and immigrants may have a good history of utility payments but no credit cards or loan payments to show. “I do think it’s wise for giving people credit for paying (utilities) on time,” he said. “The average improvement was 13 points, which may not sound like a lot, but if you’re on the borderline of being approved or not, or on the borderline of a certain interest rate, that could be meaningful.”

UltraFICO gives him pause, however. “I think it’s a slippery slope because historically your income and your assets have not impacted your credit score. It’s not how much money you have; it’s how you handle what you have.” And, like Peterson at the University of Utah, he worries about people on the cusp of creditworthiness being granted lines of credit they probably shouldn’t have.

“If you just squeak through the door now when times are good, what happens when times are bad?” Rossman said.

Steve Smith, Finicity CEO and co-founder, poses for a photograph at Finicity in Murray on Friday, Sept. 27, 2019. | Kristin Murphy, Deseret News

At Finicity, Smith and his colleagues are mindful of potential problems but say their work enables “financial inclusion” by allowing more people access to low-cost capital and credit. “There are almost always unintended consequences of any great technology, so it’s incumbent on technology leaders to deliver solutions,” he said.

To try to stay ahead of any problems, three years ago, Smith convened a two-day meeting in Park City where leaders of a dozen technology companies talked about the need for shared ethical standards; for example, “once permissioned, data can only be used for the purpose for which it was permissioned,” he said.

From that event, a nonprofit called the Financial Data Exchange was formed, and its 22-member board convenes monthly to discuss issues in the industry and create standards for the secure exchange of data. In August, the group published a white paper establishing five principles of financial data sharing: access, control, transparency, security and traceability.

“The industry is teaming up together to create a very safe ecosystem,” Smith said. Members include major banks and credit unions, Fannie Mae, American Express and H&R Block.

Peterson recently met with Smith, but he remains unconvinced about the benefits of alternative credit scoring, especially in Utah.

“Getting more access to credit is a good thing if the credit is good; it’s a bad thing if the credit is bad, particularly in Utah, which has no usury limits and very limited regulation. We have incredibly predatory loans being made here.

“Maybe you get a little more visibility, but if that means you’re being targeted by predatory lenders, it’s not going to be positive for you,” he said, adding, “It’s still a question in my mind whether or not this will be beneficial.”