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Representative Ellison Washington Street Journal Op-Ed: Bringing "Credit Invisibles' Out of the Dark

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As fathers, we know that when young people pay too much for a car or become trapped in high-cost credit-card debt, they dig themselves into a financial ditch that can trap them for years. These early debts make it more difficult for young people to build emergency savings, buy a house, or fund retirement.

We recently introduced a bill that will allow people to build or rebuild accurate credit scores without having to get additional credit cards, loans or high-cost debt. The Credit Access and Inclusion Act allows utility and telecom companies--such as cellphone providers--to report their customers' on-time payments to credit-reporting agencies.

While this bill gives companies permission to expand credit reporting, it is not a mandate. But under current law, regulatory uncertainty has prevented reporting of on-time payments for some services. Since most companies that report primarily note only late payments, consumers miss out on the positive credit they could be building.

Limited credit information damages consumers in several ways. Consumers with fewer than three credit accounts are considered "unscoreable" and have no credit score. These "credit invisibles" are limited to high-cost debt from payday lenders, pawn shops or unregulated finance companies.

Nationwide, approximately 35 million to 50 million credit-invisible consumers pay more for basic services such as car insurance, renters insurance and even rent for housing. Collectively, they carry billions of dollars in high-cost debt. By adding utility-payment information to a consumer's payment history and credit file, we can end credit invisibility and help people gain access to more affordable financing.

According to the Policy Economic Research Council, adding reporting from just one telecom or utility firm would enable 74% of credit-invisible customers to get credit scores. If utility and cellphone payments were reported, the research council predicts that 15% of young people between the ages of 18 and 25 would move from having no credit score to being able to qualify for credit at prime--not subprime--rates, with similarly good results across many other demographics of age and race. The research council also found that about 55% of consumers who had suffered a bankruptcy or had very late payments saw their credit scores increase when a utility or telecom payment was included.

Enabling credit invisibles to enter the economic mainstream will benefit the overall economy since these individuals will pay less for credit and insurance and have more disposable income. They will improve their ability to become homeowners and entrepreneurs. Fuller credit reporting will provide better detection of identity theft, as consumers will hear sooner of thieves opening accounts in their name.

Utility and telecom services accurately reflect a consumer's on-time payment history. Overlooking this distorts credit reports and prevents economic growth by limiting lending and investment. It is rare for Congress to be presented with a simple and no-cost solution to a vexing problem, so we need to enact the Credit Access and Inclusion Act without delay.


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