Study finds incorporating rental history could boost credit scores

Many borrowers could benefit if lenders took rental history into account when deciding who would make a good candidate for a mortgage or other loans, according to a study from credit bureau Experian.

The study focused on nearly 20,000 people in government-subsidized housing who pay their monthly rent on-time, Bloomberg Businessweek reported. Of that group, 11 percent had no credit file at all, but once rental history was added in, 59 percent had prime credit scores, 38 percent had “nonprime” scores and just 3 percent had “subprime” scores.

For the rest of the group (those that already had a credit score), about two-thirds were considered subprime borrowers. But when rental history was added in, about 74 percent saw their scores increase by an average of 29 points, Bloomberg said. Only 5 percent saw their scores decrease. Someone jumping from “subprime” to “nonprime” could see credit card interest rates fall an estimated 4.2 percentage points, according to the study.

Experian and TransUnion are beginning to include rental payment histories into credit files and will use them to calculate credit scores, syndicated columnist Ken Harney wrote last month.

Source: www.businessweek.com


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