Council tax payments and subscriptions to Amazon Prime, Netflix and Spotify could enhance Britons’ credit scores from today under a new feature launched by one of the big three credit reference agencies.
Around 8million UK customers could benefit from the ‘boost’ service from Experian, which will allow them to use monthly payments to improve their chances of being accepted for a mortgage or credit card to lower borrowing costs.
Earlier in the year, This is Money said credit reference agencies could go down this route with growing numbers of people paying bills this way.
Experian’s ‘boost’ feature was originally launched in the US in March 2019
The service will be free and customers could improve their credit score by up to 66 points, provided they consent to sharing their banking data with the reference agency.
The new feature, initially launched in the US in March 2019, will take into account regular council tax payments, payments into savings accounts and Isas and subscriptions to TV and other streaming services.
It comes as the coronavirus lockdown saw a huge rise in Britons signing up to TV and other streaming services as they were cooped up at home.
UK households collectively hold around 27.1million subscriptions to Amazon Prime, Disney+, Netflix and Now TV, as part of a trend towards what UK payment regulators last year called ‘the renting of everything’.
The reference agency, which along with Equifax and TransUnion helps determine whether or not Britons are permitted to borrow money, said the service would only ever positively affect people’s credit scores.
It said based on initial testing of the service 51 per cent of users could see an instant increase in their credit score, while 12 per cent moved up an entire score band, for example from ‘fair’ to ‘good’.
This is Money reported months ago that subscription service data could be used by credit reference agencies
Britons’ Experian credit score ranges from 0 to 999, with five bands ranging from ‘very poor’ to ‘excellent’.
The main way for consumers to improve their credit score has usually been to take out credit and demonstrate they can handle it responsibly, be it a mobile phone contract, a credit card or a broadband deal.
But reference agencies are increasingly looking to other data sources to help ‘thicken’ the credit files of consumers to help provide more comprehensive information about their financial situation and day-to-day spending habits.
|Experian credit score category||Score band|
|Very poor||0 – 560|
|Poor||561 – 720|
|Fair||721 – 880|
|Good||881 – 960|
|Excellent||961 – 999|
Experian’s new service will use open banking data from customers’ bank accounts, which they can choose to share with the reference agencies. All the major UK current account providers allow customers to share their data this way.
TransUnion’s director of data strategy, Dave Webber, previously told This is Money that open banking was a source of information that was ‘becoming increasingly available’ to reference agencies and other lenders.
He said it ‘offers finance providers unparalleled insight into a consumer’s ability to afford repayments’, by allowing Britons to offer up their current account data and transactions.
Andrew Hagger, the founder of personal finance site Moneycomms, called the launch ‘an excellent example of how open banking can deliver tangible rewards for consumers.’
He added: ‘The potential financial benefits of this new initiative could see some customers having access to more favourable interest rate terms and improved credit limits.’
However, some may feel uncomfortable not only with the principle of sharing their banking data, but doing so with a company which a fortnight ago was ordered by the Information Commissioner’s Office to ‘make fundamental changes to how it handles people’s personal data within its direct marketing services.’
After an enforcement notice from the ICO, Experian has until July 2021 to inform people that it holds their data and how it plans to use it for marketing purposes. It also has until January to stop using personal data obtained through its credit referencing business for marketing.