By Carla Fried | American Express Credit Intel Freelance Contributor
5 Min Read | August 4, 2021 in Credit Score
Credit reports demonstrate how well you manage most – but not all – of your financial obligations.
What credit reports don’t include, such as on-time payments of rent and utility bills, may help to improve a credit score.
You can’t self-report those “alternative” types of accounts to credit bureaus, but you can work with a third party that will report them on your behalf.
You pay your utility bills on time, make your rent when it’s due, and keep a balance in your checking account. These tell a lot about how financially responsible you are, but, alas, they aren’t reported to the credit bureaus.
Perhaps you already noticed that the last time you checked your credit report for accuracy. Unfortunately, this means these laudable personal finance actions aren’t factored into your credit scores, which, among other things, can help to determine whether you’ll qualify for a loan, new credit card, or favorable interest rate. It’s also a missed opportunity if you’re trying to build your credit score.
In a world where so much can be shared, self-reporting your good information to the credit bureaus – Equifax, Experian, and TransUnion – isn’t allowed. However, services that track your bank accounts for recurring payments that are not part of the traditional information collected by credit bureaus can report the information for you.
Cost of these services generally ranges from free to $100. That said, neither the financial information they track is universally used by the three main three credit bureaus, nor are lenders necessarily pulling versions of your credit score that incorporate the information.
Let’s begin with an understanding about the types of financial activity that are reported to the three credit agencies. They include recurring payments made for mortgages, credit cards, car loans, student loans, and similar types of debt. However, payments for utilities, such as electricity, cable, internet, phone, and water, typically aren’t reported – unless a payment is missed. The same applies to rental payments, as well as positive information about your bank accounts, such as your ability to consistently maintain a healthy balance.
Assuming these bills are consistently paid on time, think about how that may help boost your credit score.
While you can’t self-report on utility and rental payments, you can work with services that track and report such information to the credit agencies on your behalf. Let’s take a look at two, both of which are free.
Experian Boost: Sign up, link your checking account, and the Experian credit bureau will comb through your bank statements to track and report on-time utility payments, cell-phone payments, and even monthly auto-payments to streaming services and the like. On average, according to Experian, people see a 12-point jump in their Experian FICO scores.1 Experian Boost has the potential to improve an Experian FICO credit score or VantageScore, but it leaves out Equifax and TransUnion scores. If a business checks your Equifax or TransUnion scores from either FICO or VantageScore, there won’t be any boost.
Moreover, Experian Boost is only applied to the FICO 8 credit scoring model unless otherwise noted. So if, for example, you’re buying a home or refinancing a mortgage, a lender likely will check an earlier version of FICO. Similarly, Experian Boost is applied to Experian VantageScore versions 3 and 4.
UltraFICO: With this service, FICO monitors checking accounts, savings accounts, and money market deposit accounts to determine an UltraFICO score. The longer you have had a bank account without any overdrafts, the better your UltraFICO may be. For favorable results, the bank account also needs to have an average balance of $400 for at least three months.
FICO estimates that seven in 10 people who maintain a positive bank balance could earn an UltraFICO score that is higher than their standard FICO score.2 Worth keeping in mind, an UltraFICO score doesn’t replace a FICO score. Rather, they’re sent together. Also of note: UltraFICO is being piloted and not in use by most lenders yet.
Paying rent on time is clearly a sign of financial responsibility, but that information typically isn’t reported to the three credit agencies – and it can’t be self-reported, either. The credit agencies will, however, accept rental payment history reported via rent-reporting services, some of which are free, while others require an enrollment and/or installment fee plus monthly payments for the forwarding of financial information.
Rent-reporting services typically require a landlord to use a payment platform that forwards records to a credit bureau. Signing up may be worthwhile if you expect to move to another rental. Attaching a credit report that shows your track record of on-time rental payments to a new lease application may help get another landlord to yes.
However, not all credit scoring models factor in all the information sent to the credit bureaus. That applies to rental information. While FICO 9 does incorporate rental information from a credit report, most businesses rely on FICO 8, which does not. And mortgage lenders tend to use an even older version.
In other words, your rental record isn’t likely a factor in the FICO credit scores businesses use to evaluate creditworthiness. The VantageScore, which is a joint scoring system developed by the three credit bureaus, does incorporate rent information.
Credit bureaus have traditionally not included certain recurring payments you may make on time, such as for utilities and rent. You can’t self-report to the credit bureaus, but you can authorize the information to be included in your credit report by working with an outside service. The end result could be a boost to your credit score.