Tuesday, May 19, 2015

Credit Scores Now to Include Rent Information

9/26/14 - An individual's credit score is one of the largest factors affecting their ability to get a mortgage or other type of loan. Unfortunately, your credit score is determined mainly from the payment of debts: credit card bills, loan payments, etc. Even if someone has paid their rent on time every month, or has made routine payments on their cable, cell phone, or utilities bills, all of which should be a good indicator of reliability and credit, this information is nowhere to be found on their credit profile. In an L.A. Times article, Kenneth R. Harney describes how two national credit bureaus: Experian and TransUnion, have recently started including rental payment information in their determination of an individual's credit scores.

Up until recently, there was nothing that required landlords or phone and cable companies to report payment information to the credit institutions, nor was there any system to make this reporting of data feasible. While the reporting of this payment information is still voluntary, a newly created connection between these credit bureaus and an online service called RentTrack has made it much more convenient for rental property managers to report payment information from their tenants' records.

According to Harney and a study by TransUnion, this addition of rental payment information can have a dramatic effect on a renter's credit score; in some cases, their scores increase up to 10 points. Furthermore, this research showed that even the shift from renter to home-owner can raise scores considerably. With the RentTrack system, as well as another system called ResidentialCredit, tenants in any situation benefit from the ease and reliability of electronic tracking of their payment information.

While the RentTrack system currently only keeps information on rental payments, Harney believes that it will just be a matter of time before telecommunications, cable, and utilities information make their way into the system. While RentTrack is the main service mentioned in the article, some other companies, such as Equifax and ECredable.com, also hold information regarding utility payments, rental data, and more, which can be given to a mortgage loan officer for use in determining an individual's credit and determining whether they will qualify for a loan.

As Harney concludes, while an individual's credit score was once based solely on mortgage and credit card payments, that is no longer the case. As such, we may soon witness a new trend: even those individuals lacking “traditional” credit information will find it possible to become first-time homeowners.

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