Just when we think we understand the rules, all of the rules change. The financial education that we receive includes the warning that if we don't responsibly pay the loans we've received, the "big three" are going to find out about it and our credit scores will suffer. It only takes one missed payment to ruin our score.
TUTORIAL: Credit Reports And Scores
The Current Process
Here's how it's supposed to work: All of the important financial transactions that involve credit are reported to the "big three" credit reporting agencies: Experian, TransUnion and Equifax. They aren't the only reporting agencies, but they're the biggest and the three that lenders use to judge your credit worthiness. According to Experian, it hold records on 215 million Americans, around two thirds of the American population. (For related reading, see How To Establish A Credit History.)
Every month, lenders submit updated information about you to each agency. This information may include how much you owe that institution, if you're making payments on time and if you applied for a credit card or loan. They also search public records to see if you filed for bankruptcy or to gain information on foreclosures.
But that's where the reporting ends. These reports aren't designed to get a holistic view of your financial habits. They're only concerned with how you handle loans from financial institutions and that has caused some lending institutions to cry foul. Getting credit is much harder than it once was and lenders want to know more about you. They want to know how you handle all of your financial responsibilities and because of that, the rules that we've always known about credit are slowly changing. The big three may soon become the big four.
A new product by CoreLogic aims to paint a complete picture of your financial activities. Its report includes missed rental payments, child support judgments, applications and your payment history for payday loans. Other seemingly insignificant information, such as property tax liens, unpaid homeowners association dues or the state of your mortgage payments may also be included.
What kinds of implications does this report have on your future ability to get credit? For now, not much. CoreLogic is already marketing this report to customers, but it won't be available until March when CoreLogic publishes an actual credit score based on this data. Additionally, these reports are being developed specifically for mortgage and home equity lenders so CoreLogic's impact on other credit activities like cell phone contracts or insurance won't be an issue. (For more information, read The Importance Of Your Credit Rating.)
Lenders and other financial institutions will undoubtedly find a report like this valuable. The New York Times reports that it may only be a matter of time until CoreLogic evolves this product into something that rivals the big three agencies.
The Bottom line
Now that you know that somebody is compiling this data into a report, it's time to abandon the idea that our financial responsibility is only measured by what we do with our credit cards, mortgages and other bank-related obligations. CoreLogic requires each of us to now be responsible for everything we do with our money because somebody is not only watching, they're telling our banks and lenders. (For related reading, see 5 Keys To Unlocking A Better Credit Score.)