How millions of Americans can get a better credit score

Is your credit score a little lower than you'd like it to be? Recent research indicates that millions of people in your position could actually watch their scores go up with some small changes in the way credit reports are compiled. 

Though most people in the country have to pay utilities bills, these payments aren't included in credit scores along with regular charges such as mortgage loan collections, something which relatively fewer people are obligated to pay, but is more often included in credit scores. One recent study found that if monthly charges such as utilities and rent payments were to be included in credit reports, a significant number of peoples' scores would rise.

Gas and electric companies are used by almost every home in the county. With everyone making these payments monthly, including them in credit reports would have a massive - likely positive - effect on these peoples' scores. 

If on-time utility payments were included in credit reports, the number of Americans with a subprime credit score below 600 would drop by nearly 50 percent, the study found. The people in the nonprime, or fair, credit bracket between 600 and 660, meanwhile, would surge 54 percent. The number of individuals with scores over 660 would increase by 15 percent. A change such as this would be especially useful to the "credit invisible," or people with very little useful information in their credit reports. 

Increasing attention being paid to alternative data 
Interest in the use of so-called alternative data in order to boost credit scores has been increasing in recent years, as credit standards have been tight and mortgages hard to come by. There is a significant number of people with thin credit profiles, who have no access to lines of credit that could help them improve their scores. The inclusion of utilities and rent information would certainly bolster the size of peoples' credit files, and give each of these individuals a chance at an improved score. 

A person's credit score is definitely important, but also critical is how much information is contained in the individual's credit report. An increase in the volume of information a credit file contains is enough to yield benefits such as lower interest rates, even if the person's risk segment remains essentially the same. 

The popularity of alternative scores is evidenced by the growing influence of alternative credit scores such as PRBC. With so many people set to see their scores rise with the inclusion of alternative data, the volume of the discussion over whether or not to include rent and utilities in credit scores seems to be growing louder.

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