Non Traditional Credit

A non traditional credit report is what is needed when you are a person that does not have a credit report or if you have one it says little about you.

With all the talk about credit scores and those worrying about every move they make in relation to their credit report and score, those who haven't worked toward, or are having trouble creating a credit history may feel they will be left out in the cold.


This is far from true. 





You pay your bills every month, possibly with cash or a money order, or many times with a personal check. If you have been making timely payments on rent, car insurance, utilities, a cell phone these all can be used just the same as lines of trade on a traditional credit report.


You want to become a home owner but you think you have no way to show that you are a credible risk to your lender


Fact is that many banks and lending institutions have guidelines when underwriting loans to those whose credit comes up as "thin". Particularly when writing up a mortgage and perhaps in the case of a new car loan, something called a merge report will be run on the individual.

This merges the information from all three major credit bureaus into one report. If not much history comes up then they will follow through to the non traditional credit report.

Usually the non traditional credit report cannot be used for those that have a traditional credit report but have a poor payment history just to make that report look better. Yet that may change.


This type of credit report is exclusively for those who when a credit check is initiated by a lender and the results show that individual as having either no record or not enough credit history. People that fall into this category do not use credit cards or loans, or records of these just don't have any length of history.


What is in the non traditional credit report


FHA, Freddie Mac and Fannie Mae all have lengthy experience and their own guidelines when it comes to the non traditional credit report.


All expect to see regular timely payments to housing rents and utilities. Mix that with payments to accounts such as life and automobile insurance payments, mix in payments to furniture stores or any local stores for items on a payment plan, medical bill payments, school tuition payments, ect. and you have the non traditional credit report data.



The Anthem Report: A non traditional credit report 

As evidence shows other lending institutions are also interested in the area of non traditional credit as more and more options seem to be opening up.

One of these options is called the Anthem Report. A company called Corelogic Credco looks to be the primary marketer of this product.


It takes non traditional information and uses it to produce a credit score much like the traditional FICO product.

The score range is 325 to 850

It starts with using the information used in the Merge Report and then adding the alternative information. It says it heavily relies on rent payment history as predictive of future mortgage payments.


Sounds reasonable and obvious to me!! 



In the words of their website it says The Anthem Score was developed to fit seamlessly into existing mortgage, underwriter and investor guidelines.


Also they include support in Spanish as well as English I'm thinking to attract the immigrant population. If they really want to be current they should add Portuguese, Creole, Vietnamese and Chinese to the support languages to start!.


Like the traditional credit score and report, they gather information about you and create a risk score according to that.


What if they do not retain the best payment information about you? Below is another option that you will have more control over.


PRBC REPORT

Another option in the arena of the non traditional credit report is something called a PRBC report. Or as it is otherwise known as Payment Reporting Builds Credit.

Originally called themselves Pay Rent Build Credit Inc, this company blossomed into a type of credit reporting agency that lists all kinds of non traditional payments so many companies consider them a credit bureau.

They can turn all these payments into a BPS or bill paying score and this CAN be supplemented with a traditional FICO score to give a more accurate picture. If your BPS is high it could dramatically enhance a poor FICO and get you better rates.

This is different as this company will allow you to enroll and report your own payments. Therefore viewing your "credit report" does not carry a fee to do so.

The cost to enroll is free and the site says you need to enroll three accounts that you pay monthly. Then encourages you to be on time with those payments.


Yet enrolling could still have costs attached to it.

Only if you are in a hurry though.

If you start an account and manually add the information you may need to verify it and that is where a fee can come in from the account you need to verify. 

The other way is to enroll in an automatic bill pay with one of PBRC's business partners and they will automatically update the account.

This report can only be used with your permission so there will be no inquiry hits to this report.

To start a PRBC account look here.




An article from the Washington Post claims this: Under the federal Equal Credit Opportunity Act, lenders using national credit-bureau data must give consideration to credit-performance information that loan applicants can document from credit accounts not included in national bureau files.


If you have read my page Fair issacs then you know that lenders are not required to add information to the "national credit bureaus".

Information about loans and payment history can be omitted from your report. It may be up to you to inform a new prospective lender, especially a mortgage lender about any sort of information that was not included. Homework, Homework, Homework!!!


If you are in the market for a mortgage and have made attempts at cleaning up your credit along with building that score up, maybe starting an account with PRBC will give you that extra edge you need for the best rates.


They have already partnered themselves up with FICO as they use the FICO Expansion Score.

If you are already in the mortgage writing process and you were to produce a BPS, the above claim suggests they would have to reconsider their rate if your score was favorable.



The Future of Non Traditional Credit Reports



Non traditional credit is also called Alternative Data. A group known as PERC or Political and Economic Research Council claim that utility and telecom (phone) payments are the most accurate predictors at scoring individuals.

They should know as they are a think tank the government uses as expert witnesses when writing and debating the laws that are based on credit related matters.

They concentrate on economic development not only in this country but all over the world.

Their specialty is consumer credit, credit reporting and credit scoring, and the value of information sharing in commercial varying contexts.

A current project is called the Alternative Data Initiative in this initiative they are promoting the full reporting of customer payment data (as they term it). Or non traditional credit.

One of the interesting things they bring out in their report is how utility companies report negative activity but the reliable good activity goes unreported.

They also bring out that 35-54 million possibly even 70 million individuals in this country do not access traditional credit and are left to expensive forms of credit that leave them as disadvantaged. These persons are usually the poorer less advantaged Americans (to quote their publication).

It goes on to say "the lack of reliable credit, places them at a great disadvantage in building assets (such as homes, small businesses, or loans for education) and thereby improving their lives".

It further states that this kind of information can bridge the information gap on financial risk and ease them into the credit mainstream and more importantly, the information can direct markets toward a faster alleviation of poverty in this country.

With this kind of work being extended toward including this Alternative data I would say that in the near future this will become a regular feature of credit reports.

So if you aren't timely with that electric bill or cell phone payment it will be in your best interest to start doing so!!!





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