New bureau aims to give credit to reliable rent-payers

Nation's Housing

January 11, 2004|By KENNETH HARNEY

SHOULD MILLIONS of American renters' on-time payments to landlords be ignored as key elements of their credit files when they want to buy a first home? Should their credit scores routinely be depressed as a result?

Aren't on-time payments of rent functionally the same as on-time mortgage payments? Isn't the same true for on-time utility, phone and insurance payments, none of which makes it into your credit files?

Whatever your answers, the big three national credit bureaus are not set up to track monthly rental payments or to factor them into credit scores. That creates problems for large parts of the population - especially the young, minorities and recent immigrants - when they apply for mortgages to buy houses. Much of their credit performance goes untracked by the national credit system, and they score lower as a result.

The inevitable result is that they are quoted higher interest rates for their loans, and they pay higher fees to their lenders.

But that's about to change. A new national credit bureau is gearing up operations, and its mission is to track the payments nobody else tracks.

Based in Annapolis, the new bureau - PRBC (Pay Rent, Build Credit) - plans to create electronic files on 10 million renters nationwide during the next 60 months.

Consumers of all types - tenants, college students, even homeowners - who make payments that are never reflected in standard credit reports can register with the new bureau online ( There is no charge. Consumers without access to the Internet will need to seek assistance from someone who does - a realty agent, a credit counselor, a local nonprofit or church-related group, or a local branch of a cooperating organization such as the National Urban League.

There will "never be a charge to consumers" for using the service, according to PRBC's founder and chief executive officer, Michael Nathans. The bureau expects to earn revenues by selling hundreds of thousands of supplemental credit reports a year to lenders.

One of the country's major home lenders, CitiMortgage Inc., signed on as a charter subscriber late last month, and "many" of the largest players in the primary and secondary mortgage markets are exploring contractual arrangements with PRBC and are expected to subscribe in coming months, according to Nathans.

Unlike the way other credit bureaus operate, consumers will have 24-hour access to their online files. Equally significant, said Nathans, PRBC will never provide consumers' payment histories to lenders without express permission.

"Our core idea is that to become a part of the financial mainstream, you need to pay your bills on time," he said. "But if your payments are not being tracked, you are not getting the benefits [via perceived creditworthiness] that you deserve."

Though landlords can sign up as data providers, Nathans expects the bulk of PRBC's information to come from banks. Millions of tenants pay their rent, utilities, insurance and other monthly bills online through bank Web sites.

Nathans also has concluded an agreement with PayPal, an online payment service that consumers without formal banking relationships can use as an alternative. PRBC will also accept payment histories from other sources - including phone, credit and debit cards - as long as the source can send a date-stamped electronic "receipt" of payment to verify the transaction.

When fully operational, according to Nathans, the Web sites of many large banks will include icons directing the bank to report account payments, designated by the individual consumer, directly to the PRBC Data Network.

Renters and others who register on the bureau's site will be able to input up to 36 months' worth of payments that they can document. Before the bureau accepts the information as accurate, however, it will need to be verified by independent sources prescreened by PRBC, ranging from accountants to tax services to nonprofit agencies. The verifiers - and the consumers - will be subject to legal action should the information provided be fraudulent.

According to Nathans, the bureau would like to be seen as an optional "supplement" to standard credit reports - "to fill in the blanks" - and the data factored into credit scoring models such as Fair Isaac & Co.'s popular FICO scores. For young and minority borrowers with little or no traditional credit histories on file, PRBC's files will "provide a better indicator of their true creditworthiness" than they currently receive, said Nathans.

"We think we can help create equal credit opportunities for everybody who deserves a prime rate loan," he said.

That could mean you, especially if you're just starting out and don't have a wallet full of credit cards and loads of debt.

Kenneth Harney's e-mail address is

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