New systems could help those without credit raise their scores

SAN FRANCISCO (KGO) -- No credit? Bad credit? No problem. That low-rent advertising slogan is going upscale.

There are a lot of credit-worthy people who either have no credit or a lousy credit score, but with new systems they may soon see their credit score soar.

If you miss a medical bill payment it can ruin your credit score, but missing a mobile phone payment, doesn't. If you pay your mortgage on time it helps your credit score, but paying your rent on time doesn't. Credit histories, scores and lending guidelines are all subjective and that's nothing new.

Lenders used to physically draw a red line on a map, color in the middle and refuse loans to anyone living in the shaded area. It was called redlining, and it put poor and minority communities at a disadvantage.

"We don't need a map to do that, now-a-days, we have logarithms to make that happen," said Jose Quinonez.

Quinonez is a financial services innovator who was just awarded a MacArthur Fellows Genius Grant for his work with the San Francisco Mission Asset Fund.

"You basically need credit to get credit, but if you don't have a credit score you can't get credit. So they are really in a situation of being stuck," he said.

Quinonez knows those people lend and borrow with each other, so he and Mission Asset Fund now make sure credit reporting companies hear about it.

Patrick Brown joined Mission Asset Fund and is getting results.

"I am just tell you right now it is hard out here for a brother who is trying to get his credit score raised. It is hard," Brown said. "This is a different type of credit that actually supports the raising of my credit score."

And now even the biggest player in credit scoring, FICO, has come up with FICO XD, a way to score the tens of millions who are now called credit invisible.

"It looks at alternative data like how people pay their phone bills, utilities, and other public and property information," said Sally Taylor-Shoff, vice president of FICO scores.

Fico XD rolled out about six months ago.

"It's being received very well by lenders. They're in the process, many are in the process, of validating it and testing it," Taylor-Shoff said.

Sasha Werblin is with the Greenlining Institute which works to overcome the lingering effects of redlining. She's not so sure a new score by the same old players is progress.

"A solution would be that credit reports and scores accurately reflect the lived experience of all consumers not just your cookie cutter consumer. But really looking at people that are looking towards getting to the American dream or their version of the American dream," Werblin said.

Click here for an in-depth conversation with ABC7's Dan Ashley on scoring techniques.