Put simply, a credit score is a formula that lenders use to decide how likely you are to pay back a loan. If you’re considered a risky bet, you will pay more to borrow or may not be able to borrow at all., and advocates say it’s a positive that ratings agencies have started making it easier for consumers to prove that they’ll able to pay back money they borrow.
When Jonnathan Alvarado, 25, was in a car accident this past year, he knew health expenses wouldn’t be the only hit to his finances. A landscaping contractor in Plainfield, New Jersey, who prides himself on careful financial behavior, Alvarado faced knee surgery at the beginning of his busiest work season, which hurt his productivity.
“A difference of almost a hundred points,” Alvarado said. “I would have paid it off sooner, if I had known.” Experian, for example, has an option for consumers to opt into a service, “Experian Boost,” that counts these kinds of payments without charging a fee. (In some other cases, companies may charge the renter or landlord for the trouble of filing the additional information in credit reports, since it isn’t automatically included as a matter of course. Those who use the program often see an increase in their scores.
To use the tool, you give Experian permission to capture your monthly payment history and bank information — whether that’s a cellphone plan, water bill, streaming service subscription, or rent.