If you have no credit and wanted to establish it, you could start with a secured credit card or store card and build a good credit score over time. But what if you didn't want to take on any debt?
Enter RentReporters.com, a new service that validates your rent payments with your landlord and reports your payment history to Payment Reporting Builds Credit, or PRBC, an alternative credit reporting agency. Information in a PRBC report could then be scored by a FICO Expansion Score.
Unfortunately, the service doesn't report to the three major credit-reporing agencies, Equifax, Experian and TransUnion.
Earlier this year, Experian announced it would start including positive rental payment information in its credit files, thanks to its acquisition of RentBureau, a specialty credit bureau that has rental payment histories on more than 8 million tenants in its database. Rental payment data included in Experian credit reports could then be scored by VantageScore, a credit-scoring model developed by the three major credit bureaus.
Equifax and TransUnion have yet to jump on the bandwagon. The widely used Classic FICO score still doesn't include positive rental payment data in scoring.
In a press release, RentReporters.com noted that Experian's only source for rental data is through RentBureau. With RentReporters.com, consumers could proactively have their rental data reported and validated -- for a cost.
The service charges $89.95 for an annual membership or $5.95 a month, plus an initial set-up fee of $39.95. You can also have historic rent data reported -- $24.95 for 24 months of history and $19.95 for 12 months of history.
The pros and cons
"The pricing is pretty aggressive," says John Ulzheimer, president of consumer education for SmartCredit.com.
He also points out that for the service to benefit a consumer, the lender would have to use the PRBC report to make a lending decision.
To establish credit at the three major credit-reporting agencies, you could simply get a secured credit card. You'd likely have to pay an annual fee and set aside money that would serve as collateral for the account, but you'd get your deposit back when the account closes. Annual fees on secured cards range from $18 to $40, according to Bankrate's 2011 Credit Card Fees Survey.
However, secured cards and other alternatives require the use of credit, points out Crispin Luna IV, the founder and president of RentReporters.com. Rent "is something renters are already paying," he says.
On the PRBC report, the reported rental data would show up as a type of a mortgage or real estate installment account, according to Luna.
If you cancel the service, you wouldn't erase previously reported information. It would show up "just like any closed account" if you canceled the service, he says.
Weigh in: Would you pay to establish credit?
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