researching for another member on here who wants to know how things like rent payments and utilities paid on time can help her credit score.
I know there are services that claim to report on time rent repayments to the CRAS (RentReporters, Williampaid).
I know there are 'alternative credit bureaus' that will track your rent, utility, cell phone, child care & tuition expenses and build a 'credit file' for you that you can then present to potential lenders pursuant to your rights under the Equal Credit Opportunity Act, which states that they must consider this additional information befor making a credit determination for you (eCredable.com).
Does anyone know if these are effective methods, vs. just being a nice theory?
These types of tradelines would be ignored by FICO scoring, but may be included in FAKO scoring.
I would never pay for that sort of reporting, and believe it's likely to be seen as a way of "gaming" the system. The industry cracked down on use of AUs for the same reason.
Some lenders (NACA for mortgages for example) will use proof from bank statements, landlords, utility bills, etc. in lieu of credit reporting. And one of the CRAs is trying to build another business gathering and reporting this sort of data. But services that take an outrageous fee ($96.00 a year) to report payments sound like a bad idea to me.
I would be particulary cautious of any reporting service that requires you to remit payment through them in order to get the info reported to the CRAs.
I would never allow a third party to become involved in the timeliness of my payment history.
Not only is it not worth any payment, but I feel many lenders will look at this as a negative. They may consider NO history better than someone that considers paying rent ontime a positive. Paying a service to report rent or utilites on time seems really desperate and would probably be viewed like a payday loan or similar.
You need to look at this from a lenders perspective. A lender will feel that EVERYONE pays their rent, utilities, etc. on time and is never late. If you don't, then they are likely to be really scared. A person is going to be late on a loan way before they would pay rent or utilities late.
I think you will benefit far more from a secured CC than paying money to someone looking to take advantage of someone with minimal credit history.