This is helpful news for individuals who are renting due to destroyed credit in the wake of a foreclosure. It's also potentially beneficial to young adults, the biggest population of renters, who may be able to boost their credit rating simply by paying their rent on time, which will help them qualify for a mortgage down the road.
While this is a significant change, not every renter will be affected just yet. Experian has information from only 8 million landlords included in its RentBureau reporting unit, which it acquired in 2010. About one-third of the population rents.
Experian will include the data in your credit report and factor it in when calculating your VantageScore, an alternative credit scoring model developed by Experian and fellow credit reporting agencies TransUnion and Equifax. But FICO, which calculates the most widely used credit score, has not said whether it will use rental data.
My guess it won't be too far off in the future. This move by Experian is clearly a sign of the times. As 8 million fewer Americans use credit cards and fewer buy homes, the traditional ways of establishing and building credit are becoming less common. If lenders want to assess credit worthiness in the "new normal" economy, the credit reporting agencies may need to provide them with other telling variables. My gut tells me other credit reporting agencies will follow suit. And who knows what else will suddenly become a sign of credit worthiness? Could credit reporting agencies keep track of whether you pay your family loans back on time? After all, more are borrowing from loved ones in this economy partly because banks won't budge.
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