FICO score isn’t the only credit score game in town. That’s good news for people who have low scores thanks to being an immigrant, divorcee, or don’t have the means to acquire the credit in the first place. It’s one of those quirks of the system. To get credit, you have to have a credit history. To get a credit history, you need to be able to get credit. Thusly, some people find themselves a bit stuck. To meet the needs of these these “thin credit file borrowers”, some alternatives to the standard FICO score are out there. Let’s look at three.
PRBC, formerly named “Pay Rent, Build Credit,” is an Annapolis, MD startup that let’s people self-report information about their credit. Through PRBC, you can record your rent payments, loan payments, and even payday loan payments. It’s an alternative for those who have very little credit history (“thin credit file”) such as new immigrants or recent divorcees. Since the principal aim of a credit score is to determine the credit-worthiness of a borrower, i.e. how well they can pay back loans, a long track record of on-time rent payments would be helpful to know (currently not tracked by standard FICO). PRBC would be of limited value if it only stood on its own, fortunately in November of 2007, Fair Isaac announced that the PRBC credit report would be included in the FICO Expansion Score.
VantageScore is a collaborative effort by the three major bureaus to create a competing credit score model. Unveiled in the spring of 2006, it tweaks an already customizable equation (each bureau weighs the factors of the FICO score equation differently) and slaps a new name on it. Whereas the FICO score ranges from 300 to 850, VantageScore ranges from 501 to 990 – everyone’s score is automatically higher! In reality, since the score is derived from the same data, you only need to focus on making sure the bureaus have complete and accurate information.
FICO Expansion Score
The aim of the expansion score is to “look at non-traditional credit data” to help determine credit worthiness. Again, if you’re in that “thin credit file” group, then this expansion score is important because it collects data from non-traditional sources. The score has the same range as the standard FICO score, 300 – 840. The downside of this expansion score is that since credit reporting is entirely voluntary, there’s no guarantee that your rent payments are being reported to Fair Isaac. In fact, unless you know your landlord is reporting data through PRBC (or if you are reporting it yourself and then having it verified), it probably isn’t being reported.
If you have a low score with the standard FICO model, you’ll likely have a low score using any other calculation. These alternative scores won’t be able to magically turn a 400 into an 800 (what do you think they are, investment bankers?), but they can give a more accurate picture of a borrower who has very little information reported about them to the bureaus.
Jim writes the blog Blueprint for Financial Prosperity.