The alternative credit bureau Pay Rent Build Credit Inc. is using information from the bill payment software company Billeo Inc. to establish credit scores for people with thin or no credit histories.
Unlike the traditional credit bureaus, which keep track of loans that are granted and those that are not paid on time, Pay Rent Buy Credit creates a score based on a person's record of paying bills on time. The Annapolis, Md., bureau is expected to announce today that it has started incorporating into that process payment histories generated by Billeo.
"There are large swaths of the population who pay their bills on a regular basis," but that information is not reflected in standard credit reports, said Corey Stone, the bureau's chief executive. "For people starting out in particular, or people who are recovering from past credit problems, there's an incredibly important set of information that just doesn't show up."
Billeo's software helps people manage the bills they pay through biller sites. These payments are typically made with credit or debit cards, and more then 40 issuers advertise the Santa Clara, Calif., vendor's software to cardholders.
The alternative credit bureau also uses data provided by regional bill payment providers, and it operates its own payment site through CheckFree Corp., a unit of Fiserv Inc., but Mr. Stone said that none of these can reach a broad audience. "Billeo's really the first national player that has decided to do this," he said.
Billeo is offering to sign up its users with the bureau. The vendor does not charge them a fee, but Pay Rent Build Credit requires $5 to open a credit file; Billeo will process the payments for clients.
Murali Subbarao, the vendor's CEO, said that when people enroll with the bureau, they will not start with an empty payment history, because Billeo will send their payment histories to the bureau.
Mr. Stone said that his bureau can also establish a history for users, but it charges about $15 per payee to seek out the information from billers, and $20 to document past rent payments. The fee covers the cost of confirming past payments, he said. "We call the landlord" to confirm rent payments. "It's a manual process."
Many online bill payment users have little credit histories, Mr. Stone said, and alternative credit scores such as his bureau's can be an important way for people to qualify for new credit, especially big loans, such as a mortgage.
"Typically a bank will see 15% to 20% of its online bill pay users, when they sign up for online bill pay, not have a FICO score," he said. The data his bureau tracks is "really the difference between being able to get a home loan or not."
Jennifer Roth, a senior analyst with the global payments practice at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said the deal between the two companies would be helpful for people who want to build a credit history but do not want to risk going into debt with a credit card.
However, the service will not erase a bad credit history, and Pay Rent Build Credit does not have the reach of the more prominent bureaus, she said. A strong payment history with the two companies probably will not be weighted as heavily as information on loans.
For example, card histories will show whether payments arrived late or bounced, but Billeo's data shows only whether payments were made, and though it includes the payment's date, that would not indicate whether the payment was past due, Ms. Roth said.
Still, the service is beneficial to the niche it serves, Ms. Roth said, and is a good fit for online bill payment. "It's the start of something more for bill pay. Billeo is a good step."
