Vision Credit Education, Inc.

According to Fair Isaac Corporation, 50 million Americans may have little or no credit history. Known as “unscorables,’ these consumers with ultra-thin credit files lack the forms of credit that has traditionally been reported to credit bureaus. Although some effort has been made to open credit scoring to this class, most lenders have not fully embraced alternative scoring models.

FICO Expansion Score

In July 2004, Fair Isaac Corporation announced a new alternative scoring model. This FICO Expansion score was created to help track credit histories for consumers that lacked mainstream credit accounts.

Nontraditional credit sources reportedly include utility bills and even some payday loan outlet usage. Rent was not included. Some elements of FICO’s Quality score are included, which according to Consumer Affairs, include state vehicle registrations and even data from Nielson Media survey members. It is unclear how television viewing habits is a predictor of creditworthiness.

Anthem Score

First American created an Anthem score to include SCOREX rental information as well as utility bill payment information. MassHousing, a lending agency based in Boston, appears to be the main client.

PRBC

Short for Payment Reporting Builds Credit, PRBC also uses utility bill payment and rental information to create an alternative credit score. I have personally seen CEO Michael Nathans present this scoring model at North Carolina’s Second Statewide Conference on Financial Education and Asset-Building.

Beneficiaries

The greatest reward for alternative credit scoring will be in the form of better credit terms for those with non-traditional forms of credit. This includes people that have paid their bills on-time, but do not have credit cards or other traditional loans.

The group that this will not benefit is the so called “unscorables” that have poor payment histories on rental accounts and utility bills. This group could find it harder to obtain credit, as their previous “no credit” classification could be replaced with a “poor credit” label.

Delays in Alternative Credit Scoring

Much interest and progress has been made in developing alternative credit scoring models. Fair Isaac Corporation and a number of other companies have marketed their own versions of non-traditional credit scoring products.

The delay however, is caused by the unwillingness of most mainstream creditors to fully embrace these alternative credit scoring products. Few companies utilize these products as a matter of policy for lending decisions.

Some lenders are still evaluating whether to utilize alternative credit scoring. Many are weary to change the so called tried-and-true FICO based credit scoring models.

Unless lenders begin using alternative credit scores in lending decisions, these products will never accomplish their intended goals. The unscorables may remain with no credit history.