MicroBilt Corp., a data provider to smaller retail and community banks, has made an equity investment in Pay Rent Build Credit Inc., a credit bureau that deals in nontraditional data, the two companies are expected to announce this week.
Executives at the two companies said the investment would provide more information about "thin-file" consumers, who often have not established enough of a credit history for the traditional credit bureaus to evaluate, to the credit unions and small banks that are most likely to serve them.
"We're taking the information they have and adding it to some of the tradeline reporting that we do," Bob Raleigh, the chairman of MicroBilt, said in an interview last week. "We're actually creating a new report."
Mr. Raleigh cited estimates that 50 million to 70 million thin-file consumers do not qualify for credit because they do not have bank, card, or loan accounts.
"Together we'll qualify many millions of people for Fair Isaac" Corp.'s FICO Expansion Score, which uses nontraditional data sources to rate consumers with no credit, he said.
"It's a whole set of consumers with a lot of very good credit," said Brian Bradley, the executive vice president of strategy and new markets for MicroBilt, a Kennesaw, Ga., division of Bristol Investments Ltd. "It is opening up a whole new market."
Once such consumers are rated, they may become more eligible and attractive to the community banks and credit unions the data provider serves. "We think we can expand their eligible customer base by at least 25%," Mr. Raleigh said.
Corey Stone, the chief executive of Pay Rent Build Credit, of Annapolis, Md., said the investment would help the credit bureau expand its reach. "Its main impact will be to expand the volume of data that we have in our repository and to expand the volume of reports that we sell, as more customers come online using our data," he said. "What has us most excited is the potential that MicroBilt brings with its distribution to thousands of community banks and credit unions."
The executives declined to disclose the amount of the investment but said the deal was more significant in terms of operational strategy than finances. Mr. Raleigh said it would create "a multitiered relationship that will evolve over time and create interdependence between the two companies."
Mr. Stone said the investment "helps us obviously grow with the capital that we need," but "the partnership with MicroBilt is about the provision and distribution of data, and the investment is incidental to that."
He said his credit bureau already has similar relationships in the mortgage field but does not "have similar relationships today or anything on the type of scale that MicroBilt brings outside" of that space.
(The investment will not prevent his company from pursuing such relationships with others, Mr. Stone said.)
"The ability for a large segment of the population to be able to demonstrate that they have the ability to repay loans is going to bring mainstream rates and mainstream types of credit to parts of the population who haven't had access to them before," Mr. Stone said. "Merchants and financial institutions that have up till now shied away from serving this population will have greater confidence in serving them."
John R. Ulzheimer, the president of educational services at the lead generator Credit.com Inc., said the investment made sense for both parties. MicroBilt and Pay Rent Build Credit "call on the same customer base," he said. "It's a big deal — it significantly expands the relationship base that PRBC has" with small lenders.
