Experian Adds Rental History to Credit Scores

NEW YORK (MainStreet) — Credit bureaus don’t give much weight to a person's history of rent payments when considering creditworthiness, but considering that one-third of the U.S. population either plans on or is already renting a house or apartment, Experian (Stock Quote: EXPN) is ready to give the American renter some respect. It's a credit boost for people who make regular, on-time rental payments.

Experian estimates that there are about 96 million Americans renting today and that they are “not getting the ‘credit’ they deserve”, Experian says. Most of those renters are college students, immigrants and young Americans living on their own for the first time. The common denominator is that none of them have a decent chance to build some positive credit.

But if you include a pattern of positive rental payments, apartment dwellers can jump up a rung or two on the credit scoring meter, Experian says.

“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,” says Brannan Johnston, vice president and managing director at Experian’s RentBureau division. “Our research shows that over one in three consumers in the highest risk VantageScore score band will improve to at least the next score band with the addition of positive rental data.”

Experian only plans on applying positive, “continuous” rent payments to its credit scoring model starting this year, but there are plans to include negative rental payment histories by 2012.

The company is taking a piecemeal approach to counting rental payments, as Experian plans on tracking a few million renters at first, not all, and then adjusting the program as it gathers more information. The Dublin, Ireland-based company only has access to the rental records of about eight million U.S. apartment dwellers (based on its access to about 45 U.S rental management companies), which explains the limited scope.

There’s another potential fly in the ointment, too: Minneapolis-based Fair Isaac (Stock Quote: FICO) isn’t jumping on the rental credit scoring bandwagon because it wants more time to see where Experian takes the idea.

“FICO is looking forward to receiving a sample of this expanded data set from Experian so we can evaluate the predictive value of rental data in Experian’s consumer credit reports,” the company said in a statement. “Our approach has always been to let the data tell the story, so it’s too early to predict what effect the availability of this data might have on consumers’ FICO credit scores.”

Still, if Experian gets the rental calculation model off the ground, FICO may have no choice but to jump in.

For renters, that’s great news – all those months of paying your lease may finally help your credit score, and that’s going to help millions of Americans get better deals down the road.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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