More and more often, paying your rent on time can come with a little pick-me up for your credit score.
Experian this year announced it will use rental payment data from its recently acquired RentBureau to help consumers who aren’t credit users establish credit or improve their Experian brand VantageScore credit score.
Late last year, a relatively new FICO Expansion Score began including data from PRBC (formerly Payment Reporting Builds Credit) Consumer Reports which include bill payment information on nontraditional types of credit, including rent, utility, cable, telephone, insurance, cell phone, loans from friends and family members, child support, even daycare provider payments.
Both services are designed to better serve previously underserved, but perfectly creditworthy consumers who don’t have traditional forms of credit, including bank credit cards, retail credit cards, personal loans, mortgages or other forms of credit that typically show up on credit reports maintained by the Big Three credit reporting agencies – Experian, Equifax and TransUnion.
According to the National Multi Housing Council, there are nearly 96 million individuals currently renting (and regularly paying utilities and other reoccurring bills) who are not getting the credit they deserve. In the past, on-time rental payments and other non-traditional credit payments typically didn’t boost a credit score or even show up on credit reports.
“Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent,” said Brannan Johnston, vice president and managing director, Experian RentBureau.
“Our research shows that over one in three consumers in the highest risk VantageScore score band will improve to at least the next credit score band with the addition of positive rental data from RentBureau,” Johnston added.
The vast majority of mortgage lenders view credit scores in the mortgage application process.
For consumers who don’t want credit, the additional data and or a higher credit score can help them obtain better rates from insurers and a more favorable opinion from potential employers who use scores to help set rates or make hiring decisions.
VantageScore, ranging from a low of 501 to a high of 990, uses both a number and a letter grade (A, B, C, D or F).
Aligned with the standard FICO Score, ranging from a low of 300 to a high of 850, the FICO Expansion Score includes information from consumers who have little or no credit information on conventional Equifax, Experian and TransUnion credit reports.
Thirty-five percent of credit-underserved consumers have been shown to have FICO Expansion credit scores above 640.
In both cases, consumers have to use online bill payment partners that report to Experian or other agencies that use the FICO Expansion Score. Consumers may also have to request that such payments be reported to each agency automatically as they pay their bills.