Use ‘alternative’ payments to build credit history

Steve Ely likes to talk a lot about numbers, especially as they relate to young adults building a credit history.

And therein lies the problem, he said. Many college-aged teens have, at best, scant experience with credit cards, car loans and other types of transactions that can create good numbers that show lenders you can pay on time. Better credit scores, of course, translate into lower interest rates and monthly payments.

How do fledgling borrowers flip the equation?

As I’ve noted in previous columns, secured credit cards are a way to start building credit history. But Ely, a 24-year credit industry veteran and chief executive officer of eCredable in the Atlanta suburb of Alpharetta, Georgia, suggests another strategy that can help younger adults create their first credit report and credit score from scratch — and fast.

“You can create a really good credit score from just two or three utility bills that you pay on time,” Ely said. And the score can be improved overnight, not in six to 12 months, he added.

That’s the premise behind Lift, a creditbuilding service that includes so-called “alternative data” like cable and internet, cell phone, electricity, gas, water and other utility payments in a user’s credit history on file with TransUnion, one of the big three credit bureaus.

eCredable hopes to offer similar services with Equifax next year, Ely said. Experian, the other big credit bureau, has its own product called Boost (www.experian.com).

Here’s how Lift works. Generally, most utility companies do not report positive payment history to the credit bureaus — only past-due accounts. That means you don’t get credit for paying those bills on time.

When enrolling with eCredable at www.ecredable.com, users are required to provide log-in information — user name and password — to your online utility accounts. Using safeguards, Lift can then log into your account and download up to two years of payment history from up to nine different alternative payment accounts (power, gas, water, waste, mobile phone, cable TV, satellite TV, internet and landline phone). Users can report an unlimited number of accounts from these categories and have the option of choosing which utility accounts to include in the service.

The service scans your utility accounts every month looking for new payment information to update your credit report at TransUnion.

For example, when you apply for a credit card, the creditor will access your credit report from TransUnion that will include a credit score. If the creditor uses the popular FICO Score 8 or VantageScore 3.0 credit scoring systems, it will include cell phone, internet and any other “alternative” payment histories you’ve selected.

Since launching Lift in 2019, Ely said about 60,000 users have signed up for its service, which costs $19.95 a year. Although Experian’s product is free, its services and account protocols are slightly different than what Lift offers.

eCredable does not report rental accounts to TransUnion, although it refers its customers to Rental Kharma (rentalkharma.com) and RockTheScore (rockthescore.com) for this service.

Ely said the average credit score improvement is 30 points, which can make a big difference when applying for a credit card.

Credit-building programs such as Lift appear to be perfectly suited for collegeaged young adults who are starting to live independently and are trying to build credit or repair existing problems. They rent, rather than own a home, and might be paying their own cell phone, internet and cable and other bills.

Lift can also help young adults build credit from a side hustle or micro-business they started during the pandemic.

What I also like about Lift is that users get rewarded for good money management habits quickly. “If you already pay your bills on time,” Ely said, “we get all that history and put it in your credit report so it enters the financial ecosystem.