Exciting New Evidence Reveals a Way for the “Credit Invisible” to Get Credit
"The power of three" is a potent rule in many realms, including when it comes to accessing financial potential.
Take, for example, your credit score. It has three digits, which tells a story to lenders and creditors about what kind of credit risk you are – for better or for worse.
There are three credit bureaus in the U.S. who have an impact on your ability to qualify for credit: Experian, TransUnion and Equifax. "The Big Three" credit bureaus are for-profit, private agencies that collect, analyze and sell your credit information in the form of credit reports to businesses.
There are several reasons why it's important to have your rent reported to all three bureaus:
1. Credit bureaus don't share information with each other.
2. Not every lender or creditor reports your information to each bureau, so the data used to calculate your credit score may be significantly different.
3. Similarly, potential new lenders or creditors may only check your score or report from one bureau when assessing your creditworthiness, and you don't get to pick which agency they use.
Good news for those with thin or no credit
VantageScore 3.0 — the credit scoring model created jointly by the top three credit bureaus to calculate your credit score from your credit report information — has released new evidence that looking at credit scores from all three of the top bureaus and then predicting consumer behavior based on that combination yields much better results than using data from just one bureau.
According to the report, using all three scores can "easily boost the predictive level of risk assessments – by more than 20 percent for a quarter of consumers who are typically credit invisible."
That means that there are three million additional credit-worthy consumers who will finally qualify for loans or credit cards if the data from all three bureaus is taken into consideration by lenders.
This is good news for companies in the business of granting loans and credit, since it's in their best interest to find ways to expand their customer base without increasing their lending risk.
And for customers, especially those that have limited or no access to credit, this new evidence can be life changing. From getting approved for credit cards with affordable interest rates to getting a cell phone, financing a car and much more, this is now a proven way to open financial doors that have otherwise been slammed shut.
However, until the practice of combining data from all three credit bureaus for a composite score becomes more widespread, it's a good idea follow these tips to show potential lenders your creditworthiness:
1) Make sure your rent is reported to all three bureaus.
Making monthly on-time rent payments is an excellent way to demonstrate positive, consistent financial habits without taking on any debt. Many scoring models count this alternative data as a factor in your score, which makes it even more important to ensure that all three bureaus get the information. While you can't report your payments yourself, RentTrack can for you — so you don't have to rely on your landlord to take that initiative on your behalf (right now, most landlords do not report to credit bureaus at all).
2) Check your credit reports from all three bureaus for accuracy
You are entitled to a free credit report annually from all three bureaus, and it's important to carefully review each for errors. As mentioned, the data each has can vary, and according to the Consumer Financial Protection Bureau (CFPB), 74% of people who filed complaints with agency said their issue was about inaccurate information recorded on their credit reports. So read your reports carefully and be on the lookout for incorrect information.
FYI, if you use RentTrack, not only are you assured that your rent payments are properly reported to all three bureaus, but you also get to see your credit scores from each with a breakdown of all the factors affecting it. And if you sign up for credit protection, you'll get instant alerts so you'll know right away if any wrong information is unfairly reported and then can take immediate steps to protect your credit.
3) If you find wrong information on your reports, dispute it.
When you're checking your credit reports, remember you also have the right to dispute any mistakes or fraudulent activity you discover. Keep in mind if there's an issue you find on all three credit reports, you will need to dispute it with each credit bureau individually. This way, you'll ensure that the problem is fully and properly fixed.
Here's how to contact each bureau to dispute any issue you find on your credit report:
File a Dispute
P.O. Box 740241
Atlanta, GA 30374-0241
File a Dispute
P.O. Box 2104
Allen, TX 75013-0949
File a Dispute
P.O. Box 1000
Chester, PA 19022
While the new evidence shows that taking all three scores into consideration is the best case scenario for consumers and potential lenders and creditors alike, be sure to give equal love to your credit score at each agency by actively monitoring your credit reports.