Your credit score is what determines if you are approved for a loan, can get a good deal on a cell phone plan, have utilities in your name, and are approved for a credit card. But, what if you’re like one of the 45 million of Americans who have a low or no credit score?
Simply put, your credit score reflects the information found in your credit report and is used to determine your creditworthiness – it tells lenders how likely you are to default on an obligation. And without credit, getting access to financial products and the best deals so that you can get what you need in life can be challenging.
Companies like RentReporters are working to change the system to reflect the realities of modern economic life for the 100 million renters in the US. How? We’re doing this by reporting your on time rent payments to TransUnion, one of the three major credit bureaus.
You pay your rent on time, every month, and that shows responsible, financial behavior. We believe that your rent payments, which are probably the largest recurring monthly expense you have, should count toward your credit score. Bottom line, it’s time to use alternative data points to determine credit worthiness.
So, here are few of the pros for using alternative data for credit scoring and reasons why credit bureaus should rescore those renters who pay on time:
- Traditional credit scoring models do not reflect modern life.
- The financial marketplace is largely controlled by traditional scoring models, such as FICO.
- There is growing interest in using alternative data to recalculate or formulate credit scores. This year the Consumer Financial Protection Bureau issued an inquiry on this topic for the first time.
- The scoring of alternative (and reliable) data such as on time rental payments helps consumers, especially those that fall under the “Credit Invisible” category – those with no credit scores or have a thin credit file – gain greater access to the mainstream credit markets.
- Monthly rent payments are highly correlated with the ability to repay debt in a timely manner.
- People should be rewarded for this type of “consistent responsible financial behavior,” which has gone unrewarded in the past simply because they were not paying on a home mortgage, car payment, or regular credit card.
Here at RentReporters, we’re helping renters improve their scores to change their lives. To learn more about RentReporters, visit here.