Michael G. Nathans has long thought that renters in this country are treated as second-class credit citizens.
Millions of folks pay their rent on time and yet, when it's time for them to get a mortgage, all those on-time payments aren't part of the all-important score that lenders use to determine whom to grant credit and at what interest rate.
So Nathans, whose Maryland-based company was already in the credit-reporting business, decided to create a new credit bureau for renters. It's called Pay Rent, Build Credit Inc. (PRBC for short). It's a free, Web-based service that allows consumers to submit information to verify they have paid their rent.
"There are 35 million renters in this country, and they are not getting credit for on-time rent payments," Nathans said in an interview. "Rent payments can be the size of mortgage payments. We've given 'equal credit opportunity' a whole new meaning."
But it's just not rent payments that are not considered in credit scoring. What about all those on-time cable, utility and day-care payments you make every month?
Shouldn't consumers get credited for paying those bills on time, too?
Nathans thinks so. And so do I.
Just think. If the almighty credit-scoring models took such payments into account, perhaps many people wouldn't get trapped into charging so much on their credit cards in the name of building a good credit history.
Nathans said the PRBC credit bureau would enable consumers to build a credit history using many payments (rent, utilities, auto insurance, even self-storage-unit payments) not typically reported to the major credit bureaus.
I think Nathans is right when he says that if his service becomes successful, it could be a significant development for first-time home buyers. This new credit bureau would especially benefit black and Hispanic consumers, who lag significantly behind whites in home ownership but often have good rent-paying histories that are not included in credit-scoring models.
