There’s new legislation gaining momentum in Washington. If it passes, consumers could have more avenues for building credit.
The Credit Access and Inclusion Act of 2017 (H.R. 435), currently being considered in the U.S. Senate after having passed the House with bipartisan support in June, would allow telecom companies, landlords and utility companies to report consumer credit history to the three major consumer credit bureaus: Equifax, Experian and TransUnion.
This could give low-income consumers, who might struggle to build credit, another way to show lenders they’re responsible with credit — which in turn could help them qualify for credit cards, auto loans, student loans, personal loans and mortgages. And if approved, it could help them qualify for lower interest rates.
But critics say the Credit Access and Inclusion Act might do more harm than good. If consumers fall behind on their housing, utility or telecom bills, the negative information could drag down their credit.
What does this mean?
The House passed the Credit Access and Inclusion Act on June 25. Before President Trump can sign the bill into law, the Senate must follow suit. If it makes it past these remaining hurdles, the bill would amend the long-standing Fair Credit Reporting Act, which regulates the information collected by consumer-reporting agencies, like credit bureaus.
If you have a credit card, auto loan or mortgage, you might have noticed that lenders typically report both your positive and negative payment histories to the credit bureaus.
But telecom and utility companies tend to report only the negative credit information on a consumer — if they report at all. Proponents of the bill blame that on a confusing patchwork of state laws that limit what information the companies are allowed to share with credit bureaus.
The Credit Access and Inclusion Act would open the door for these nontraditional credit sources to also report positive information, like on-time payments. Plus it would open the door to landlords, including the Department of Housing and Urban Development. But critics argue that the bill misses the mark, because reporting would be optional, not mandatory, so telecom services, landlords and utility companies may have little incentive to help consumers build credit by reporting.
Why should you care?
The Credit Access and Inclusion Act could help consumers, but it could also raise the stakes for them, too.
How could it help? By having lenders provide more information about borrowers, consumers may have a more diversified way to build credit and more-accurate credit profiles. With more data at their disposal, potential lenders may be able to better determine a borrower’s creditworthiness when deciding whether to approve them for credit.
On the flip side, if you miss rent payments and your landlord reports that to the bureaus as a result of this new bill, not only could you be facing a landlord scolding, but you could also be hurting your credit.
What can you do?
Don’t wait for the Credit Access and Inclusion Act to pass to start building credit.
Take your credit into your own hands by making on-time payments on all of your bills, from your credit cards and loans to your rent and cellphone. By developing responsible financial habits now, you can put yourself in a better position to succeed, regardless of the outcome of this legislation.
If you find yourself in a situation where you’re struggling to build credit, your first steps to building credit might include applying for a secured credit card or asking to be an authorized user on your parent or guardian’s credit card.