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Late-night commercials for used cars promise "no credit, no problem." But for the 50 million Americans who have little or no credit -- among them young people, recently widowed or divorced individuals, immigrants and those who proudly operate on a cash-only basis -- it's "no credit, no luck" if they want to get a credit card, take out a car loan or buy a house.
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To remedy the situation, Fair Isaac, the company that compiles the FICO credit score, has developed an Expansion score, based on nontraditional consumer-credit data, including deposit-account records and layaway purchases. Compiling nontraditional credit information isn't always easy, says Craig Watts, of Fair Isaac. Most states, for example, prohibit utilities from disclosing the payment histories of their customers. Reporting other types of payments is voluntary, so data can be spotty.
But young people and others without credit may be getting a break. Fair Isaac announced in November that it would include information from Payment Reporting Builds Credit, a Web site that gathers data on rent and other recurring bill payments.
You can enter your info into a Web file, which PRBC charges a fee of $15 to $20 to verify, or set up an automatic bill-payment system through your bank or credit union and have the records sent to PRBC. In addition, PRBC reports include data from RentBureau, a new company that collects rental histories from about four million apartment units.
Surefire solution. The three major credit bureaus also have a spotty history of gathering nontraditional credit records. TransUnion says it includes such data in its files, if it's available. But Equifax is reluctant to report information that's not uniformly available for all individuals. Experian plans to launch its own alternative credit score this year.
Until the new scores catch on, the best way to get credit if you don't have a history is to apply for a secured card at a site such as Credit.com or CardTrak.com.
With a secured card, you make a savings deposit equal to your credit limit. Secured cards generally charge high interest rates plus an annual fee. But after paying your bills on time for about a year, you may qualify for unsecured status and get better terms or apply for a different card. Steer clear of secured cards that charge setup fees.
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POSTED BY: carlo vandeci (February 18, 2008 11:43 AM)
I found this article so useful and very informative..
POSTED BY: Cautious (February 29, 2008 11:15 AM)
Our increasingly predatory credit system, combined with economic policies that are widening the class divide and depressing real wages for many people, make the use of credit cards similar to using bottles of nitroglycerin in a juggling act: very cool until you drop one. A word to the wise: use a Visa debit card, don't spend money you don't have, beware of indebtedness during a time of deepening recession, rising credit defaults and banking liquidity problems. The System is impersonal: it doesn't care what happens to you - it just wants to make money off of you...Buy a house now?...Sit tight, be patient and wait for things to bottom out. Then proceed cautiously with a sound plan to ride the next business cycle upward.
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