Growing effort to include utilities accounts in credit scores
The financial responsibilities of individuals are often vast each month. Plenty of people pay rent or a mortgage, not to mention water, electricity, cellphone, credit card, cable and other bills, as well as student and car loans. In the wake of the global recession, many have struggled to pay off the various accounts, to the detriment of their credit scores.
However, when things are going well, an individual's credit history may not clearly reflect financial stability. A positive history of repayment doesn't necessarily help a person see a higher ranking. However, if that were not the case, not only would more people likely qualify for financial help, but lenders and other creditors would probably be able to expand operations and see greater success.
Some steps in the right direction
Slowly but surely, relief is coming as more credit bureaus and lenders are looking to factors such as utilities accounts as indicators that individuals can afford to pay back loans or other lines of credit. For instance utility provider Yorkshire Water is reporting positive histories of repayment to one major bureau, according to The Telegraph.
There are incentives for services providers as well, the newspaper noted, as they will likely be able to access individuals' histories, and then tweak payment plans if they've got a problem making ends meet.
"With increased financial strain on households, there is an increasing need for us to understand and gain insight into those customers who are facing financial hardship," Yorkshire Water's head of customer service Jonathan Harding told the news outlet.
These efforts are taking shape elsewhere, as American lawmakers proposed a bill to Congress in late 2012 that would lend itself to utilities companies reporting all repayments.
"Those who have yet to gain credit should be able to use all of the tools available to them to establish their credit worthiness," said Ohio Representative Jim Renacci​, co-author of the proposed legislation.
What does this mean for companies?
While this might indicate that only consumers and credit bureaus themselves need to be concerned about the developments made in this area, that is not the case. In fact, it would behoove many lenders to work something like the Payment Reporting Builds Credit score into the application approval process. Because the industry seems to be taking strides to make this type of score more mainstream, lending companies that look at this more comprehensive financial profile will be steps ahead of their competitors and can easily open themselves up to a wider target audience.