Most Americans well understand the importance of a good credit score and work diligently to achieve and maintain a strong history of debt management. Numerical ratings like FICO and VantageScore are widely used for most lending decisions as well as pricing insurance, evaluating rental applications and even vetting job applicants.
This is a problem for many consumers. According to Money.com, 47 million Americans are considered subprime (with a credit rating below 600), an increase of 1.2 million over the past year. Another 45 million people are considered “invisibles” with no credit history at all. In response, a host of new products have appeared purporting to help build or boost credit scores, some good, some mediocre and some real turkeys. A free or low-cost credit building app can be worthwhile especially if you are at the margin but beware exaggerated promises and hefty fees and mind the details.
The familiar FICO score was first introduced in 1989 by the Fair Isaac Corp. and became the de facto standard for underwriting mortgages, car loans and credit cards. A competitive product from the three reporting agencies, called VantageScore, has also gained market share, particularly in credit card issuance. Both scores attempt to distill a borrower’s creditworthiness onto a single scale ranging from 300 to 850 and while not the sole criterion, this score remains a central factor in lending decisions. About 70% of consumers maintain scores considered to be good, averaging 717, according to FICO.
For those with subprime or nonexistent records, there are several options to assist in establishing or improving their profile.
Mortgage loans represent a major source of data at the three credit reporting agencies, Experian, TransUnion and Equifax. However, no payment history has typically accrued to the 30% of Americans who rent even though these outlays average about a third of their total income. Now some newer applications provide an opportunity to report and benefit from timely rent payments as well.