Tuesday, January 20, 2004

Imperfect credit markets

A friend of That's News To Me (yes, we have friends too!) writes:

"Here's an interesting idea.  Basically the company tracks the timeliness of your rent payments and then sells this info to the three major credit bureaus and loan companies as a supplement to your credit score.  Eventually the firm hopes that rent payments will be included in your FICO score.  I had never even thought about the fact that paying rent on a timely basis has no impact on your credit score, but paying a mortgage on time does."

Check out the website here.

I wonder if many people will volunteer for the service. I also wonder why the credit agencies don't look at rent payments anyway -- it seems like it would exclude lots of lower income people from building up good credit... You would also think that building managers would refer people to services like this, since it increases the costs of non-payment (and therefore, presumably, there would be fewer delayed rent checks).

Companies like PayRentBuildCredit.com could rectify an important inefficiency in the credit market (something economists always like) if in fact there was no rent-to-credit translation service before.

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