Installment or Revolving? how will Experian quantify the new Rental Trade lines?

I detail the changes that will effect renters now that Experian will begin reporting good and bad credit history in their main repository file. Experian became the first of the three major repositories to start including good rental history in their main repository file. In June of 2010 Experian purchased Rental-Bureau a division of Atlanta based Decision Services International. For the first time we are starting to see good rental history being reported on consumers credit files. At this time, FICO the nationally recognized expert and only scoring model accepted by Fannie and Freddie, is not factoring in the Experian rental history. Vantage 2.0 however will include those new credit accounts into their score but it is not used in the mortgage industry.

Throughout the last fifty years, active credit account have primarily fallen into just a few categories. The two predominantly used were installment and revolving accounts . The new category puts quite a wrinkle in to those neat clearly defend categories. The information is being reported with the high credit representing the entire sum total of all rental payments. The balance is then reduced by the amount of the rent on a monthly basis. So that would sound like a Installment loan correct? What if the lease then converts to month to month after the initial term? Would it then become an revolving? Why would it make a difference? Well FICO treats installment and revolving accounts vastly differently when calculation consumers FICO score. So FICO will need to create a whole new category to incorporate the new type of accounts into FICO Score. FICO has struggled to gained acceptance of FICO 8 model, even though it is vastly improved over the currently accepted FICO98 (that was developed over 10 years ago).

So the 96 million renters currently paying rent on time, it will help them buy a car or get better insurance (when the vantage score is used). Unfortunately they will not be improving their odds of getting a home with this history added to their repository file. It could also create confusion for consumer and Mortgage Loan officer who review consumers credit files and see multiple good trade lines yet still score badly on the FICO score.

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