U.S. Sen. Tim Scott (R-SC) introduced legislation that seeks to expand credit access for Americans with limited or non-existent credit histories.
The Credit Access and Inclusion Act, S. 1465, would allow credit bureaus to collect payments data for services not traditionally factored into credit reporting, such as rent, internet, phone, electricity, and utility payments. Factoring these payments into credit reporting would expand credit histories and generate credit scores for consumers who were previously “unscoreable.” That, in turn, would help consumers build an established track record of paying their bills on time develop a positive credit history.
“It’s simple, if you pay your bills on time, your credit score should reflect that. This commonsense bill will reward hardworking Americans who manage their finances responsibly, expanding access to credit to help them purchase a home, finance their education, or pursue their dreams,” Scott, chairman of the Senate Banking Committee, said.
“Over 40 million Americans are considered ‘credit invisible,’ with no history of payments attributed to their credit score. This places them at a disadvantage when it comes to gaining access to credit,” Rounds said. “Our legislation would allow credit bureaus to collect alternative data, such as on-time rent and utility bill payments, helping to build out a credit history.”
The lawmakers said that having no credit or thin credit makes economic mobility difficult and hampers an individual’s ability to purchase a home, take out student loans, buy a car, or even get a job.
“Millions of Americans pay their utilities, their rent, and their phone bill and other things on time every month, but the narrow scope of credit reporting today doesn’t include these payments, so it doesn’t get calculated into their credit score. Our bill is really a simple fix to expand the credit reporting that will then allow these responsible Americans to build credit,” Cramer said.
U.S. Rep. Young Kim (R-CA) is sponsoring companion legislation in the House of Representatives.
“Having good credit opens new doors for Americans. Unfortunately, our credit system has not kept up with technology, keeping Americans from building their credit score despite showing consistent positive financial behavior, such as paying their utility or cable bills on time,” Kim, co-chair of the House Financial Literacy and Wealth Creation Caucus, said. “The Credit Access and Inclusion Act expands ways for hardworking Americans to grow their credit and get a leg up.”