What if your credit score included things like rent payments, utility bills and tax obligations? What if it also told lenders if you’d ever borrowed using risky or subprime products? A new type of credit evaluation being rolled out by a company called CoreLogic could include all of these details and more. The company says it will help lenders better evaluate who to lend to and could increase borrowers’ access to credit, but consumer advocates worry that it will further marginalize people on the fringes of the financial mainstream. “Our concern is that instead of having thin or no files, these people will just have bad files,” says Chi Chi Wu, staff attorney for the National Consumer Law Center, who expresses concern that borrowers with a history of using primarily “subprime” services like payday lending and rent-to-own agreements will be avoided, rather than courted by mainstream lenders.
CoreLogic is a big financial services conglomerate, and its databases contain a lot of information about debts, payments and other activity that wouldn’t traditionally make it into a consumer’s credit file. The company’s “CoreScore” credit reports are now available to lenders, and the scores themselves — created through a partnership with FICO — will be available to lenders at the end of March. Like the traditional FICO score, people will be scored within a range of 300 to 850.
Debra Rothrock, vice president of product line management for CoreLogic, says one lender has already signed up to use the service in its mortgage business. Currently, consumers can only dispute errors via the phone or snail mail, but Rothrock says an online dispute process will be implemented within the next year. Also, by late 2012, consumers will be able to get a free copy of the report used to generate their CoreScore via annualcreditreport.com, the site that currently offers consumers one free copy each year of their credit reports from the three major bureaus.
Initially, the reports will contain some information that wouldn’t be on a typical credit report like an apartment lease application, she says; CoreLogic plans to add monthly rent payment data to the mix later in 2012, along with other things like eviction records and possibly even utility bills. Rothrock says the scoring formula will take into account situations like a tenant withholding rent because the landlord won’t turn on the hot water and promises that the dispute process will be easy for consumers to navigate.
“It’ll provide more information for the lenders,” Rothrock says. “We anticipate it will allow them to extend credit to people they don’t have much data about today.” CoreLogic’s view is that a record of timely payments — even on so-called nontraditional products like rent-to-own furniture — will indicate that a borrower is a good risk for more traditional forms of credit.
Wu is skeptical that consumers will benefit if lenders are given all of this additional data about their current and past financial activities. “When you are creating a score based on payday loan data, what use is that going to be put to and who’s going to be using it?” she says, contending that a report full of subprime or “nontraditional” data will be a red flag to lenders even if borrowers are current on the payments, because the terms are so onerous it’s easier for them to slip into default, not only on that loan, but on other ones, too. “I’m not sure they’re going to get a score that would help them qualify for anything,” she says.