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Expanding Your Credit Score

Expanding Your Credit Score

A bill first introduced in Congress last year, and re-introduced this year seeks to change the definition of credit-worthy.  The Credit Access and Inclusion Act would allow things like rent, cable and utility bills to be included in credit scores.  The bill is aimed at expanding credit for those who may be struggling to get loans.  "Especially those individuals who don't have any credit because they don't sign up for loans, or even people who have poor credit," says AnnaMaria Andriotis from MarketWatch at the Wall Street Journal.  "It helps consumers to build their credit."

The proposal has noble intentions and many supporters, but there are also potential drawbacks.  "People do fall behind on these bills (rent and utilities), so now all of a sudden you have an extra set of data on your credit report that could potentially harm you," says Andriotis.  Indeed, the more information credit bureaus have about a person, the more potential there is for them to find a reason to ding someone's score.  For instance, a person who was late on the rent or a utility bill for one month could suddenly have their credit score dropped.  Andriotis notes that there is another factor that could be troublesome for this proposal.  "The fact is that it's a lot easier for a credit score to drop than for it to increase," she tells KTRH.

The bill has gained some traction, but it still faces an uncertain future.  In fact, even one major credit reporting agency has come out against it.  Equifax says it already has a database of non-loan payment info that it makes available to lenders, so this bill is unnecessary.  Regardless of what happens, the bottom line is credit-worthiness is no longer a luxury in the post-recession economy.  "Credit scores have become a very important factor in determining whether people can get a home, car loans, credit cards," says Andriotis.  "Credit scores have probably never been more important for consumers than they are right now."

 

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