Credit Reports Should be Inclusive and Helpful to Responsible Americans
Having a poor or “invisible” credit score can be a highly costly situation. In fact, those who find themselves in this credit status are charged higher interest rates and can find it very difficult to climb out of the hole. A subprime credit score could mean an additional $32,923 in interest for an average 30-year mortgage.
Not only is high interest an issue, but those who can’t rely on credit in an emergency can also find themselves having to rely on costly alternative financial services such as check cashing or pawn shop loans. These services may help in the moment, but often the additional charges and the general difficulty in paying back the actual loan, can make these services much more costly than anticipated; doing more harm than good.
Sadly, millions of Amercians find themselves in the “unscorable” category when it comes to credit, and it’s very difficult to begin building credit from this position. However, the responsibility for this shouldn’t rely solely on the individual.
Many of these individuals are financially responsible, however traditional credit scores fail to include the kinds of things that they are regularly paying.
The inclusion of alternative data, such as phone payments, utilities payments, transaction histories, and rental payments, could put 90% of unscorable individuals into the scorable bracket, and many of them would be found to be prime or near prime borrowers.
The bottom line is that it’s time for credit reports to be more inclusive.