How to Create an Alternate Credit File

If you are someone who pays for everything in cash, or who has never had credit in your own name, you don't have a traditional credit score. There's no written record of your payment history, no matter how responsible you've been. With everyone from insurance agents to employers now using credit scores as a reference, you need to create an alternate credit file. Follow these steps.

Instructions

Difficulty: Moderate

1. Gather your information. In most cases, you will need to prove that you paid rent and at least three other monthly bills—-utilities, cable, car insurance, cellphone, even daycare—-on time for 12 consecutive months. Get dated receipts for every payment, and keep these in a file. If you do not have receipts, contact your landlord and utility companies for copies.
2. Work with a reputable financial institution. Start with your bank or credit union. Ask whether they will arrange to share your alternate credit file with credit-reporting services. Your bank might also be willing to use your alternate payment history as the basis for a small loan that will help you establish a more traditional credit score.
3. Apply to an alternate credit reporting service if you cannot work with a bank. Reputable services like PayRentBuildCredit (PRBC) will maintain an alternate credit file for you for a fee. Beware of payday loan agencies or "credit counselors" that charge high fees and cannot deliver the credit reputation you need.
4. Wait for your alternate credit file to be established. If your bank has requested the three main credit-reporting agencies to establish a file for you, you will need to allow 30 days for a response. If you are going through an alternate credit-reporting service like PRBC, note the time it will take to have your file processed.
5. Maintain your responsible payment history. Once credit-reporting bureaus have agreed to establish an alternate credit file for you, your payments will continue to be tracked. If you get behind on rent or utilities, you risk damaging your newly established credit.

Tips & Warnings

• An alternate credit file differs from a traditional credit file because it reports your payment history for things that traditional credit files do not include, such as rent and utilities. You may even be able to use on-time payments of child support to help boost your credit score.
• Having a credit history helps in calculating your credit score, a number between 300 and 780 that lenders use to evaluate your creditworthiness. You need a credit score of at least 700 to qualify for large loans like a mortgage or car loan. The higher your score, the better chance you have to negotiate low interest rates on loans and low rates for insurance.
• If you establish your alternate credit file through PRBC or another alternate credit reporting agency, you must tell prospective lenders or employers to include all credit bureaus, not just the three leading agencies, when they request a credit report on you.
• You may not use the alternate credit file process to erase a bad traditional credit record.
• You may not use government subsidized payments for housing or utilities to establish an alternate credit file.
• Never give your personal financial information to anyone you do not know or to any credit institution whose reputability you have not checked out.