A new website launched today that will help Americans build their credit by proving that they pay their rent on time. The service has existed in the past, but now it’s streamlined for the web.
More than 100 million American are renters, and now they can prove their creditworthiness in a fashion that, up until now, was considered “non-traditional” by credit scoring agencies. RentReporters.com provides a streamlined way of verifying rental payments with landlords, and delivers them to the credit scoring agencies. Experian, the credit information group, has agreed to use rental payments as part of their credit scores in the future. This announcement is precisely what prompted the creation of the RentReporters service.
The Service Is Not Cheap
RentReporters works like this. You sign up for the service, which charges an $89.95 one-time fee or $5.95 per month with a setup fee of $39.95, and RentReporters verifies your rental payments with your landlord, then they report this to the PRBC (Payment Recording Builds Credit), an alternative credit reporting agency. This score can then be lumped in with the other traditional means of determining a credit score: payment history, amounts owed, length of credit history, and types of credit used.
As APRs climb higher on credit cards, and the recession drags on, Americans are borrowing less money, making it harder to prove their creditworthiness. But why should credit card debt or a mortgage be the only way to demonstrate that you’re responsible with your finances?
Not only will RentReporters.com make it easier for people to improve their credit score without taking on new debt, its ease of use could make it easier to scale this form of credit reporting. If the service takes off, it could make it easier for more people to access credit once again, like home loans, auto loans, and the like. FICO scores have dropped across the board in recent years, while lenders have tightened up credit standards, making it difficult for people to borrow, and harder for the economy to rebound.
For a public that wants to borrow less money, and banks more cautious about lending, using rent payments as a way of demonstrating responsibility seems like a great idea.
Are We Comparing Apples and Oranges?
But one must wonder about the psychological aspects of this — do you think of your rent in the same way you think about your credit card bill? If you’re late on your credit card bill, you might be out a little bit of money in fees and interest payments, but you don’t run the risk of being put out on the street. So while paying your rent on time does demonstrate a modicum of fiscal responsibility, it’s unclear to what extent it demonstrates that you’d act responsibly with your credit card.
Of course, when it comes to mortgages — and this is the point of the product — there’s likely no better way of demonstrating your ability to pay on time and regularly. It makes much more sense than looking at credit card payments — at least it compares like with like.
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