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Credit-scoring models for consumers who do not have bank accounts and those with little or no traditional credit histories continue to proliferate.
The FICO Expansion Score, which Fair Isaac Corp. introduced in 2006, was one of the first to use such additional data about thin-file consumers as their histories of paying apartment rent and everyday bill payments on time in lieu of traditional FICO scores. Credit bureaus say credit card lenders gradually are embracing these alternative scores as they look to extend credit to students and immigrants, many of whom lack traditional credit histories.
In March, Costa Mesa, Calif.-based Experian Inc. launched the Emerging Credit Score. Created in conjunction with eBureau, a St. Cloud, Minn.-based technology company, Emerging Credit Score combines alternative credit data such as bill-payment histories with Experian's traditional credit data to produce credit scores for unbanked consumers.
"To develop this product we spent a few years studying the consumer behavior of unbanked consumers, including their relationships with companies and typical transactions," says Angela Baljeu, Experian manager of emerging markets.
Chicago-based TransUnion LLC teamed with L2C Inc. last year to deliver alternative, historic credit data to lenders about rent and household bill payments. Mike Mondello, Atlanta-based L2C's president, says TransUnion is routing more lender requests for alternative data this year. "When the economy tightens, we experience higher demand," he says.
As the alternative credit-data industry evolves, it is working to maintain and establish its own standards. The Annapolis, Md.-based alternative credit bureau Payment Reporting Builds Credit (formerly called Pay Rent Build Credit), which enables consumers to build credit histories by providing their own identification data and rental and household bill-paying histories, is working to legitimize and standardize that data.
The alternative-credit organization in March announced it had reached an agreement with the National Credit Reporting Association on standards for data to be included in its consumer credit files. (The FICO Expansion Score uses the organization's consumer-generated credit file information.)
"Our goal is to create an audit program that will assure lenders and investors that consumer information in [our] repository is a reliable supplement to credit reports and scores," Michael Nathans, the organization's founder, said in a statement. CP
