AccountNow Inc. has developed a way for consumers to build or repair their credit histories and improve their chances to get loans - reporting online bill payments.
The San Ramon, Calif., provider of financial services to the unbanked plans to start reporting online bill payment information this year to the alternative credit bureau Pay Rent Build Credit Inc.
"We communicate with our customers a lot, and one of the things they mentioned as a priority was to reestablish their credit standing," said Tim Coltrell, the chief executive of AccountNow, which was launched in March.
His company gives customers a debit account that can be funded at MoneyGram International Inc. locations or through direct deposit. After depositing at least $10 in their accounts, customers get a MasterCard International-branded debit card issued by MetaBank that can be used for purchases or withdrawals from any automated teller machine on MasterCard's network. Customers can also use the money to pay bills online.
"We are getting people that would be going to check cashers," Mr. Coltrell said. "We believe strongly in the idea of helping them get reestablished."
AccountNow should finish implementing the technology required to transmit bill payment data to PRBC, of Annapolis, Md., in about two weeks.
PRBC uses information such as rent and utility bill payments to create consumer credit reports and scores. Fannie Mae, Freddie Mac, and CitiMortgage Inc. have tested the scores, and Freddie and Fannie are buying the bureau's reports from a number of credit-reporting agencies. PRBC recently updated its score to fit Federal Housing Administration underwriting guidelines.
AccountNow began advertising the reporting service on its Web site and notifying customers about it in September. According to Mr. Coltrell, the majority of his company's customers have already given it permission to send their data.
Michael G. Nathans, PRBC's chairman and chief executive, said he hopes the deal with AccountNow will persuade other bill payment companies to report data to his bureau. "Anybody that offers a bill pay service is a logical fit for us."
Mr. Coltrell said his company has "discussed" the possibility of eventually offering some type of revolving credit product, because customers who improve their ratings might defect to another company that would offer them more traditional banking and credit services.
A growing number of companies have agreed to report data to PRBC. Last month the National Credit Reporting Association, a Bloomingdale, Ill., trade group that represents 130 consumer reporting agencies, agreed to help PRBC recruit agencies to report their data. The bureau is accepting information from one of the group's members and has plans to bring others on board in the near future.
PRBC also conducted a pilot test this past summer with two payday lenders that belong to the Community Financial Services Association of America: Advance America Cash Advance Centers Inc. of Spartanburg, S.C., and Check Into Cash Inc. of Cleveland, Tenn. Both lenders are now submitting data to PRBC, which has signed up six other members of the trade group, Mr. Nathans said.
During the pilot test, 80% of the lenders' customers chose to have their payday lending information reported to the bureau.
"The test was successful," Mr. Nathans said, and the number of customers who signed up "really surprised the payday lenders."
The bureau has made headway with giants such as Freddie and Fannie, but the country's three major credit bureaus - Experian Inc., Equifax Inc., and TransUnion LLC, where the bulk of consumer credit information is housed - are not currently using PRBC's reports or scores.
Mr. Nathans said there is "growing interest" from the bureaus about how to incorporate PRBC's information into their models. However, "they're still scratching their heads as to what the standards should be" for accepting and using alternative information.
Experian has been the only one of the three bureaus to publicly dabble in using alternative credit information. The Costa Mesa, Calif., bureau started using consumers' phone bill payment records to help evaluate their risk in April, and it hopes to add utility data soon to its scores.
