Credit reporting service for renters fills a void

Michael G. Nathans has long thought that renters in this country are treated as second-class credit citizens.

Millions of folks pay their rent on time and yet when it’s time for them to get a mortgage, all those on-time payments aren’t part of the all-important score that lenders use to determine who to grant credit and at what price.

So Nathans, whose Maryland-based company was already in the credit reporting business, decided to create a new credit bureau for renters. It’s called Pay Rent, Build Credit Inc. (PRBC for short). It’s a free Web-based service that allows consumers to submit information to verify they have paid their rent.

"There are 35 million renters in this country and they are not getting credit for on-time rent payments," Nathans said in an interview. "Rent payments can be the size of mortgage payments. We’ve given equal credit opportunity a whole new meaning."

But it’s just not rent payments that are not considered in credit scoring. What about all those on-time cable, utility or day care payments you make every month?

Shouldn’t consumers get credited for paying those bills on time too?

Nathans thinks so. And so do I.

Just think. If the almighty credit-scoring models took into account such payments, perhaps many people wouldn’t get trapped into charging so much on credit cards in the name of building a good credit history.

Nathans said the PRBC credit bureau would enable consumers to build a credit history using many payment accounts (rent, utilities, auto insurance or even self-storage payments) not typically reported to the major credit bureaus.

I think Nathan is right when he says if his service becomes successful, it could be a significant development for first-time home buyers. This new credit bureau would especially benefit blacks and Hispanics, who lag significantly behind whites in homeownership but often have good rent-paying histories that are not included in credit-scoring models.

Citimortgage, the mortgage unit for Citigroup, believes what Nathans is doing is so revolutionary that it has signed a three-year subscriber agreement to receive data from PRBC.

"We see this as very important in providing mortgages to customers with nontraditional credit," said Jeffery Polkinghorne, chief credit officer for Citimortgage. "The whole reason to do this is to reach out to those in the community who are having difficulty qualifying for mortgages."

Although Citimortage does take into account a loan applicant’s rental payment history, it can be a time-consuming process, Polkinghorne said.

"Eventually I hope we can build a credit score model for rental payments," he said.

A rent payment database would greatly help people with little or no credit history, agrees Craig Watts, the consumer affairs manager for Fair Isaac Corp., the company that developed the widely used FICO credit scoring model.

"One big hurdle to creating such tools is the lack of centralized sources for such data on a national level. It’s possible that PRBC will become that kind of centralized source," Watts said.

As with any other credit agency, PRBC is governed by the Fair Credit Reporting Act, which means only those with permissible purposes under federal law can access information in the company’s database.

The PRBC service is only offered electronically. To register, go to www.payrentbuildcredit.com. PRBC offers the following three ways for consumers to enter bill payment information in its database: