Can paying non-credit bills on time be used to improve credit?
Millions of consumers across the country have had trouble with their credit-related accounts in the past, and many more have likely had little or no dealings with these types of accounts. As a result, they may feel stuck in a situation in which they cannot reliably obtain credit, and certainly not at an affordable rate. Fortunately, there is a good option that might go a long way toward helping people get on better financial footing in this regard.
While many people may not know about it, a large and growing number of businesses are relying on what is known as "alternative" credit scoring to make more informed decisions about how likely a person is to keep up on their various monthly payments. The good news here is that people can also self-report payment data to alternative credit scoring companies such as PRBC so that they can be assured of an improved credit record as long as they're able to keep up with their obligations.
What's so different?
The big question many people may have here is, "What differentiates an alternative credit score from a traditional one?" The answer is actually in the name: Credit scores have long relied upon only data related to credit; that is, things like credit card bills, student loans, auto loans, and so on. But the problem is that tens of millions of millions of Americans have so little history in dealing with these accounts that they actually cannot be counted under a traditional credit scoring model and, because so many companies rely only on that history to make decisions, means they're often shut out.
So where alternative scores differ is that they encompass not only traditional credit data, but also other monthly payments. That can include things like rent, utility payments, cellphone bills, cable bills, and more. Certainly, this can help to build a positive "credit" history for people even if they have no credit accounts in their names, and potentially put them on the path to a better financial situation overall.
Why is this beneficial?
The fact of the matter is that financial experts have long called for more data to be used in credit scoring simply because credit itself does not necessarily paint a complete picture of how a person handles his or her finances from one month to the next. In that context, a person who falls behind on their credit card bill for one month but is able to pay rent, utilities, and everything else may really only be experiencing a temporary blip on their finances, but their traditional credit scores would probably take a massive hit.
The ability to tap credit, and do so affordably, is important for consumers. And because they can self-report payment data to companies like PRBC, they have more agency now than they did before. Finally, it's important for these people to remember that companies legally have to consider any alternative credit data when they are presented with it, even if they would prefer only to stick with traditional scoring.