Tuesday, March 11, 2008

New Scores for No Credit

The credit score--that silly little number that can opens or closes the door to so many things. And if you don’t have significant credit history you might feel that a good score is out of reach. But now the young, recently divorced or widowed, just moved to this country, and those operate only with cash can be scored.

Fair Isaacs has released their FICO Expansion score that uses aggregated data from PRBC (Pay Rent, Build Credit, Inc.). At PRBC people can establish credit without taking the traditional route of acquiring credit cards. The service is online and users pay a fee to have their rent and other bill payments verified. PRBC also offers a bill payment service. With that service you don’t need to have payments verified to make them count, but you do have to pay a monthly fee for the online bill payment.

Get credit for stuff you already do

Types of payments that PRBC and Fair Isaacs use to calculate credit score are:

  • Rent

  • Cable

  • Phone

  • Daycare

  • Insurance

  • Electric

  • Natural Gas

  • Cell Phone

So is this a good thing? Maybe. It’s good in that it can help you get a better loan rate. Lack of credit history usually means that you are viewed as high risk to lenders. FICO Expansion scores may make more lenders open to the idea of lending to those with less established credit histories.

But—there’s always a but—PRBC and FICO Expansion are still relatively new. Reporting and verification through PRBC can be spotty. The big 3 agencies Equifax, Experian and TransUnion aren’t offering similar reporting services—yet.

And then there’s always the old school way to build credit: use a credit card—that is if you’ll use it responsibly. But I gotta say I like the idea of getting recognition for things you are already doing—like paying rent.

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