Mortgage

Most Americans are wrong about their credit score

Think paying your cell phone helps?

A significant number of Americans are confused when it comes to what does and does not get reported to national credit bureaus. According to a new survey from TransUnion, for example, 48% of respondents assumed their rental payments are regularly reported to credit bureaus yet many landlords don’t. 

And this is not the only area where Americans are confused.

The majority also wrongly believe that payments for cable/internet (53%), utilities (54%) and cell phone bills (52%) are regularly reported to credit bureaus when they aren’t.

Only 29% correctly identified mortgage payments as data that is regularly reported to credit bureaus.

Credit agencies typically collect borrowers' mortgage, student loan, credit card, auto loan and payments of that nature to form a credit report for finance companies.

But this could change soon. Mortgage lenders might start considering rent payment history in credit history for credit scores.

“Most consumers report paying rent on-time, but many don’t realize that until now these payments are not boosting their credit histories,” said Ken Chaplin, senior vice president of TransUnion Interactive. “Renters should be aware that property managers are starting to report payments to credit bureaus and they should be consistently monitoring what is being registered on their individual report.” 

TransUnion and Experian have begun incorporating verified rental-payment data into credit files where it can be included in the computation of consumers’ scores when they apply for a mortgage.

“Expanding the share of property managers who report rental payments will produce more accurate information that truly reflects how consistently consumers meet their financial obligations,” said Chaplin “It will benefit renters who want to help their credit scores and landlords who want to attract renters who pay rent on-time.” 

Experian published an analysis on almost 20,000 people in government-subsidized housing who pay their monthly rent on time. The survey found that before adding in rental history, 11% of the same had no credit file at all, which makes it extremely hard to get loans. However, once the rental history was included, 59% of that group had prime credit scores, and another 38% had “nonprime” scores, while only 3% were considered subprime.

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