Credit History Hope Proposed

Credit History Hope Proposed

Tell Scott Walker You Don’t Want Credit Unions to Become Banks (Photo credit: Madison Guy)

Credit History Hope Proposed

There are an estimated 64 million “credit invisibles” to use the term credit reporting agency Experian uses.   This refers to those who are shut out of the mainstream financial system due to a tarnished, incomplete or nonexistent credit file.  Recent immigrants and those who are un banked for whatever reason have a new credit history hope proposed.

The Policy Economic Research Council estimates that adding just one telecon or utility bill’s history to their file would enable 74% of credit invisibles to get scores.  According to them adding utility and cell phone bills to their history would enable 15% of people between 18 and 25 to qualify for loans at prime, not sub prime, rates.

All of these people cannot be unworthy of credit.  The numbers have swollen so much due to the financial crisis that Experian and rival Equifax are thinking of using rent, phone, cable and utilities as well as such things as employment histories and length of time at address.  TransUnion, the third major credit reporting agency has been using utility data in some areas since 1993 although reporting is spotty and not widespread.

Experian has been using rental data on an experimental basis but not all landlords care to report it or can be trusted to report it consistently.  They are now trying a system for landlords to electronically report all payments that are made into a system they have devised for that purpose.

American Express has developed a pilot program to help consumers build up a financial track record with a pre paid card they are offering in partnership with Wal-Mart.  It’s too early to say if they will use this system to create a path to more trust for those who demonstrate they deserve a chance.

Critics are numerous.  The new measures are not mandatory so there is no guarantee any one particular lender will use them.   A bill seeking to amend the Fair Credit Reporting Act to require lenders to factor in rent and utility payments has been introduced into Congress but its fate is uncertain.  The law of unintended consequences dictates that such a bill could have the undesired effect of penalizing those who are spotty with their payments due to seasonal variations in pay, weather and other circumstances.  As lawyers like to say the bill is a double edged sword.

Credit History Hope Proposed will be followed closely in future columns.

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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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