Experian, the behemoth credit scoring company, announced a new credit score that’s supposedly designed to help people without credit raise their scores. On the face of it, that’s a great idea. In reality we’re looking at sound and fury, signifying nothing.
Called the “Extended View” score, it will include credit data, rental information and public record data. Experian’s Extended View score ranges from 401 to 990, compared to the 300 to 850 range for FICO scores, which are the most widely used credit-scoring metric by U.S. lenders.
Phenomenal, right? People who don’t have much credit data – in other words, those who operate their lives on cash and pre-paid cards – can get a score based on the reality of their financial lives.
The credit data is pulled from traditional credit reports and public records (no different than the existing Experian reports) as well as information culled from Experian’s RentBureau division, which collects rental payment data from property management firms and homeowners.
The problem with this new credit scoring product, however, is that the only thing really new is the information about a consumer’s rent payments. With so many people living in apartments and rental properties managed by “mom and pop” owners, that information isn’t likely being reported.
You need to understand just how credit reporting works in order to grok this one. Not just anyone can report data to a credit reporting agency – you need to be a subscriber to do so. That gives you the ability to furnish information to the credit reporting agency, and also to use their services. If you don’t pony up the money, you don’t get to report information.
Large property management companies are interested in paying to become furnishers because this also enables them to check credit reports for new potential tenants. This helps reduce the landlord’s risk of a tenant who doesn’t pay their rent.
For small property owners, however, the cost of becoming a furnisher and subscriber to the credit reporting agency doesn’t make sense – they deal with such a small volume that it’s less expensive to pay retail price for a credit report on a potential tenant. They derive no benefit for subscribing to the credit reporting agency’s services, and so neither report nor receive information.
If you’re in a rental owned by an individual or a small management company, keep a copy of your lease as well as all cancelled rent checks. This won’t help your credit score, but it will serve to show a new potential landlord that you’re trustworthy when it comes to paying the rent on time.