DIY Credit Reports Reflect New Credit Rating Trends
6 Min Read | Last updated: October 14, 2024
Millions of Americans lack access to credit. A new DIY credit reporting tool is among the initiatives aiming to give them a new chance.
At-A-Glance
- Experian has launched an app that people without a credit history might be able to use to build a credit report from scratch.
- It’s a product of a new trend in credit rating that combines alternative financial data with digital empowerment.
One of the major credit bureaus now lets people without a credit history download an app and begin writing their own history, using their track record of on-time payments for such day-to-day expenses as phone bills. The January 2022 launch of Experian Go provides a striking example of the changes sweeping the credit reporting and rating industry, where new technologies are increasingly used to crunch more types of financial data and serve more borrowers better.1
Today, 28 million American adults are considered “credit invisible,” because they have no credit history on file at any of the major credit bureaus, according to research by Experian. Another 21 million are “unscoreable,” because their file contains so little information.1 They could have easier, cheaper access to credit if they could add data to their files that would increase their credit rating.
Already, several developments described in this article are also employing alternative financial data and digital access to modernize what the financial industry is now calling “traditional” credit reporting and rating. That traditional approach, largely based on conventional borrowing, like credit cards and bank loans, has long presented a kind of “Catch 22.” That is, people can’t get credit without a credit history – but can’t build a credit history if they can’t get credit.
Instead, recent DIY credit repair options let people link their banking account activity to their credit reports, to add alternative data like bill payment information. Another now accepts on-time payment information from today’s highly popular “buy now, pay later” (BNPL) trend in online shopping. A third has developed the “CashScore,” which looks at individuals’ cash flow instead of credit history.
What Is a DIY Credit Report?
Experian itself paved the way for its new service with an earlier DIY credit repair tool for people with existing reports. Now, the company lets people without a credit history make a credit report from scratch.
Experian Go builds on Experian Boost, which the company says has helped millions of people improve existing credit reports and credit scores since 2019.1 Users of Experian Boost can do DIY credit repair by linking to their bank account(s) to find savings patterns and on-time payments, which the company then asks permission to add to their credit history. Traditional credit reports usually include these kinds of bill payments only when they are unpaid and turned over to collection agencies.
Experian Go is available to people with no credit history at all, so they can become “visible” by starting to report to a credit bureau with no knowledge of them.
How to Make Your Own Credit Report
Here’s how the Experian Go process works:2
- Download the Experian app.
- Enroll in a free membership.
- Authenticate your identity with a government-issued ID, Social Security number, and a photo of yourself.
- Link to your bank account(s), showing financial activity and auto-pay accounts such as a streaming membership.
- Get an authenticated Experian credit report in minutes.
- Receive a credit rating (FICO score).
- Read information on how to make your credit report better.
- Consider invitations to apply for credit cards designed for credit-challenged borrowers.
DIY Credit Repair Is on the Rise
Experian may be taking DIY credit repair to a new level with DIY reports, but other companies are also actively rolling out initiatives that will reshape people’s access to credit. Among them:
- New FICO score: At the heart of Experian’s services is a new scoring method from Fair Isaac, provider of the widely used FICO credit ratings. UltraFICO, with individually uploaded data from checking, savings, and money market accounts, “can enhance your FICO Score based on indicators of sound financial behavior” according to the company site.3
- New data sources: One of the other major credit bureaus has begun supplementing its traditional credit reports with information on BNPL – those short-term, interest-free installment payments offered at checkout online. In February 2022, Equifax introduced a “business industry code” for regular reporting from the companies that set up BNPL transactions, saying “Helping more people build a credit history is one of the reasons why Equifax enabled BNPL providers to report ‘pay-in-four’ loans.”4
- Lending practices: Many lenders have expanded their use of alternative data, such as bank balances and overdrafts – sometimes overlooking low FICO scores in their decisions to lend.5
- Fintech innovations: Initiatives among fintech startups include looking at credit scores and additional data, like individuals’ cash flow, employment, and utility payments, to make lending decisions.4
The Importance of DIY Credit Repair and Reports
“There are millions of consumers who are unable to participate in the mainstream financial ecosystem today because they don’t have a financial identity,” according to Experian.1
While alternative data and digital access are often promoted for their contributions to greater financial inclusion in today’s society, many still have questions, such as: Who collects the information and how? What regulations should apply? And how will data security and privacy be assured?
The U.S. Government Accountability Office is aware of the potential benefits and risks, saying “alternative data can help some consumers establish a credit score or improve their existing one by adding information to their credit files. This could in turn improve their chances of receiving a loan, and lower the amount of interest they pay on the loan.”6 On the other hand, there are also concerns about “discrimination or violation of fair lending laws, and … creat[ing] data privacy risks.”6
The Takeaway
One small app, one more leap for the credit reporting and rating industry. Experian Go digitally empowers people without credit to begin writing their own credit history. Its launch is part of a larger trend that could help millions of people get better access to credit at better rates.
1 “Experian Go: The Next Step in Our Commitment to Consumers,” Experian
2 “How Experian Go™ Works,” Experian
3 “Introducing the UltraFICO® Score,” UltraFICO
4 “How does Buy Now, Pay Later Reporting Work?,” Equifax
5 “Unleashing the Power of Alternative Data in Lending Strategies,” The Work Number
6 “Credit Scoring Alternatives for Those Without Credit,” U.S. Government Accountability Office
Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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