credit cards

Boost credit score by self-reporting

Don Taylorq_v2.gifDear Dr. Don,
Do credit rating agencies count bill payments to Verizon, AT&T and the lease payments on my apartment? I pulled my credit rating and none of these showed up. As I have had credit problems, I have not had any credit cards for several years. The last one I had resulted in a charge off of $1,700.

When I asked for my credit score recently, I was told there was insufficient history to calculate a score. What would you suggest as a plan to build my credit score?

Can you ask that payments to the aforementioned firms be part of the computation? Would it be worthwhile to get a secured credit card to pay the aforementioned bills?
-- Susan Secure

a_v2.gifDear Susan,
Credit reports reflect an individual's payment history on credit accounts reported to the consumer reporting agencies. The three principal credit reporting agencies are Equifax, Experian and TransUnion.

The information in your credit report is used to come up with your credit score. Without a credit history, there's no credit score. Your creditors aren't required to report your payment history to every credit reporting agency. That's why a credit score can vary depending on which credit reporting agency provides the score.

FICO provides the mathematical models the credit reporting agencies use in calculating a credit score. In 2004, FICO introduced a new credit scoring model (called the FICO Expansion Score) that looks at the types of payment histories you mention in your message. You can learn more about building a credit history and about the Expansion Score in the Bankrate feature "Build a credit score from scratch."

One way the FICO Expansion score works is to check with credit reporting agencies other than the major national firms. For example, this might include payment information associated with utilities or gym memberships. Rental payments to a landlord or apartment management company also may be factored in.

You also have the ability to self-report payment histories to a credit reporting agency called Payment Reporting Builds Credit, more commonly known as PRBC. It allows you to report your on-time rental payments and nondebt bill payments. There can be a charge for the PRBC to verify your bill payment history, but you control who can access the report. You can learn more about this alternative on the PRBC Web site.

All that being said, getting a secured credit card and using it to pay your bills can also help you build a credit history. The Bankrate article mentioned above explains how it works. When using this approach to build a credit history, make sure the secure card provider reports your payment history to the CRAs. Also make sure you have a strong payment history.

Read more Dr. Don columns for additional personal finance advice.

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