SAN JOSE, Calif.—A new “alternative” credit score program could give many American’s struggling with poor or no credit easier access to loans.
Developed over the last two years by Fair Isaac, working with LexisNexis and Equifax, the program creates a payment history profile from a person's utility bills and public property records instead of their loan repayments. FICO would use that pooled data to determine the alternative score when a person with weak or no credit history applies for a credit card.
Research showed people who have a history of paying utility bills on time would also pay credit card bills on time, Fair Isaac said. Reports indicate that 53 million Americans, or a quarter of the U.S. adult population, don't have FICO scores.
The alternative scores are being made available to the 12 largest credit card issuers in a pilot program. But Fair Isaac did not say which banks will be participating, the Associated Press reported.
The program, which does not have a name yet, is not designed to replace the traditional FICO score and will only be available to credit card issuers initially. Once a person obtains a card using this alternative score, they would be able to establish a credit payment history. They could then apply for auto or home loans.
"Most people have a cell phone, gas or electric bill, and the size of those payments each month can be sizeable," Jason Flemish, vice president of consumer risk and credit products at Equifax, told the AP. "So let's give them the opportunity to benefit from paying those bills on time."
The data being gathered by Equifax and LexisNexis is also covered under the Fair Credit Reporting Act, said Tewari of LexisNexis. People will be able to dispute any negative event, like a contested utility bill payment, in their credit report.
"All you have to do is just pay your bills on time. It will give you access to credit system," Flemish told the newspaper.