SAN FRANCISCO — You get a loan and pay it back. How much, how quickly and how responsibly determines your credit score, but without a score it is tough to get that first loan.
“A lot of people are shut out of the credit system,” says Ted Rossman of Bankrate.com, “There are 53 million people, according to FICO, that do not even have a credit score. A lot of those people can be scored if we give them credit for rent, streaming cell phones and so on.”
Most of us have subscriptions that we pay monthly, just like we would a small loan, but those cell phone bills and streaming service payments aren’t tracked by traditional credit reporting services.
But that is changing. Companies are now willing to track your subscription payments, rent and cell phone bills.
There are new credit reporting companies like Perch and longtime players launching new initiatives, like UltraFICO and Experian Boost.
If you sign up and request it, these companies will keep track of those monthly payments.
“I actually really like this concept because the design is to give you credit — quite literally — for things you have already been doing,” Rossman says, “it is low risk because if it doesn’t help you, you can just shut it off.”
The catch? You have to take the time to sign up, and although these services can help you land a cell phone contract or credit card, mortgage lenders are heavily regulated and federal rules do not allow for these alternative credit scoring systems.
“They could, though, indirectly help you because you could get direct benefits for other things, a credit card, a car loan, and then if you use those responsibly it will indirectly influence the score the mortgage lenders are looking at,” says Rossman.
Experian Boost says the boost can happen instantly and the average consumer getting a boost can see a 13-point increase on their FICO credit score.