In what world would someone want to get a debit card with the name of a credit bureau on it?
Experian has been testing this question for the past year with its Smart Money debit card, which it touts as a way to “build credit without going into debt.” TransUnion has no such card, and neither does Equifax, which exposed tens of millions of people’s data to hackers in 2017.
These are the three credit bureaus that act as judge and jury when it comes to your financial life. Their reports are the basis of an all-powerful scoring system that can make or break your dream of getting the right mortgage or car loan. The Consumer Financial Protection Bureau regularly cites its flaws.
But Experian is loud and proud. In one ad, football player Travis Kelce wears a generic jersey and hawks a new card, calling it “cool.”
Since the company is not a bank, it has affiliate partners for debit cards and direct deposit, ATM access, and other checking features that come with it. There are no monthly fees and you can receive your paycheck a few days before your regular paycheck, but many other companies offer this feature.
Since this is a credit bureau that sells things like old-fashioned checking accounts, the most logical question a consumer might have is, “With this card, I can get Experian credit that I didn’t have on my own. Will there be more reports?” In other ways?
To answer that question, you need to understand a little about the other Experian services that come with the Smart Money debit card. It’s called Experian Boost, and my colleague Anne Kearns wrote about it when the company introduced it in 2018.
You don’t need an Experian debit card to sign up for Boost. Boost services are also available for other debit cards.
The Experian card itself doesn’t have any special perks to increase your credit. This seems to exist primarily to enhance boosts. Or as Experian spokeswoman Sandra Bernardo said in an email after executives did not speak by phone: Our goal is to help consumers participate in the credit ecosystem without taking on debt, help them achieve their financial goals, and empower them through the process. It is to do. ”
Like debit cards, Boost is also free. It’s a good time to sing a little joke that should be part of the consumer’s repertoire. “If something is free, that product could be me.”
How could that be? Boost works by helping people with limited credit (or bad credit) improve their credit. Once you sign up, Experian scrutinizes your debit card transactions and looks for recurring payments on certain bills that help prove you’re trustworthy to potential lenders.
Potentially. be. May. These are words that Experian repeats on its website. How often does Boost actually provide improvements?
To its credit, Experian does publish details on the probability that the boost will work. Out of every 100 people who sign up, 41 don’t see any increase in their specific FICO credit score. Experian uses this score to track the impact of boosts. Of the 59 people who responded, the average increase was 13 points. (Boost only reports good behavior, so it won’t negatively impact your credit score.)
For a score of 850 points, that’s not a lot. Banks often have credit score “bands” (bad, good, excellent) to set interest rates or reject people outright. In Experian’s sample bands, only 8% of Boost users who saw an increase in their scores progressed from one band to another. This improvement could make a difference for people seeking loans, even for a small percentage of users.
This data is based on Experian’s recent Environmental, Social, and Governance (ESG) Standards Report. To drive home the point, Experian wants us all to think of Boost as a social good. And the company says that among Boost users who started out in the “poor” credit range and saw their scores rise, the service helped them escape purgatory.
Still, Boost may not help many of the 15 million people who have signed up to improve their credit. As far as Experian is concerned, Boost should certainly be harmless as it relates to ESG, right?
This brings us back to our adage: when something is free, you are the product. In a recent presentation to investors with little to do with ESG, Experian described Boost in a slide titled “Expanding data sources for a 360-degree view of the consumer.” According to Experian, Boost is “consumer-permitted data.”
Experian sells your data to lenders and others who are considering doing business with you. If you don’t have much of a credit history, lenders will need to get to know you better to determine if you’re a good candidate for a loan. In fact, Boost allows the shades to open wider, giving Experian’s financial customers that full view.
Whether or not Boost is a social good depends on where you sit. If you want to get credit as quickly and cheaply as possible, someone needs to keep track of everyone.
Experian helps with that and invites new people to the database. However, this is the same Experian I wrote about in 2009. At the time, they were getting into all sorts of trouble for charging consumers to get the free credit reports they were entitled to by law.
The situation got so bad that the Federal Trade Commission was forced to create its own commercials to create a program to counter Experian’s message. The FTC’s pitch was similar. “Other sites may look away. They say they’re free, but don’t get me wrong. Once you’re inside their web, they’ll sell you something else in return. It will come.”
That’s already cool. But is Experian a debit card? With all due respect to Mr. Kelce, it is difficult to express such unconditional support.
