What is Alternative Credit Data?
If you don’t have a credit report at one of the three major credit reporting agencies, what can you do? You have to take the time to build your credit. How do you do that? You get credit from those easiest to get credit issuers such as retail card issuers or a secured credit card issuers.
Retail cards can only be used at the store and don’t have a high credit limit. But, they do help when it comes to establishing credit. Secured cards require a savings account to back them up and you only have credit for that amount. But again, they help you to build credit.Consumers that don’t have credit accounts from mainstream lenders are often called “underbanked” or “unbanked.” And, these people do not have credit reports. But that doesn’t mean they don’t have some sort of “record” out there somewhere.
There are other companies that collect data not collected by the major credit reporting agencies. A few collect things like apartment rent, utility bill, and cell phone bill information. These types of payments have not been typically collected by the credit reporting agencies on any large scale. Experian recently purchased a company that collects rental data though.
PRBC and L2C
There are several companies that collect data on those that don’t have credit files; PRBC and L2C are two. PRBC used to be called Payment Reporting Builds Credit and is now owned by a company called Microbilt. According to PRBC more than 600,000 Americans are building financial histories with them. Consumers create their own accounts online and list their rent payments and utility accounts. After collecting this information for at least 12 months, consumers can request PRBC to verify their accounts for a fee. Rental verification is $20 and $15 for each type of bill. The average fee is about $65; average number of accounts is four.
CoreLogic, formerly called Credco, has a database with landlord and tenant eviction court records, rental performance history, rental applicant data and standard credit information, transaction records on high-risk consumers that are typically not included in a credit report. They also offer to mortgage lenders, a mortgage report on consumers with little or no credit history called “The Athem Report”. It is based on verified non-tradition credit data and a unique score.
LexisNexis uses data sources such as property ownership records, utilities, professional licenses, and voter registration along with conventional credit data. They also have developed scoring models for thin/no-file consumers using attributes (characteristics) that have proven to predict risk such as: age, predicted income, property value, education, address, previous address, phone, and high risk addresses.
FICO has also developed a score to be used on this same population; it is called “The FICO Expansion Score”. It is calculated from nontraditional credit data such as checking account usage, cell and landline telephone, utility data, membership club obligations, judgments, liens, bankruptcy data and more. This score has the same score range as the FICO® Score, 300-850.
According to the Center for Financial Services (CFSI) there are 30 million consumers who are unbanked. This is a large portion that also probably does not have any credit, credit report or use traditional credit services. These consumers would do better to actually have credit reports residing at the national credit reporting agencies.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.