Most people don't know how their credit scores are decided

While many people are aware that late payments can hurt their credit scores, that is about where common knowledge stops and the questions begin.

Experts found mass confusion in the results of a survey on what people believe factors into their credit scores. Close to half of the respondents, 48 percent, indicated that they believed rent payments are automatically reported to credit bureaus. In addition, more than 50 percent of those surveyed believed that utilities fees, cable and internet bills and cellphone payments each, are also reported to the bureaus. 

Many consumers report that they pay their rent on time, but don't understand that these payments are not getting factored into their credit histories. Experts suggest that renters be aware of whether or not their property managers are reporting their payments to credit bureaus. If they don't people should suggest that they start. In general, you should monitor what is being registered on your own credit report. 

Typically FICO, the most commonly used scoring model, tracks all of an individual's credit accounts when compiling a credit report, including credit cards, retail credit accounts, installment loans and mortgages. Negative items such as bankruptcy, judgments, foreclosures, liens and charge-offs also remain a part of your credit report for seven years. The other major factor when determining a credit score is the timing of one's payments. 

Alternative credit scores take into account more
Changes are coming to the way that credit scores are developed, though, and this may mean that beliefs on credit scoring won't have to change too much. Rental payments are increasingly being counted among the factors that play into credit scores. This means that the creditworthiness of renters can be reflected in the same way as that of homeowners. 

"Expanding the share of property managers who report rental payments will produce more accurate information that truly reflects how consistently consumers meet their financial obligations," said Chaplin. "It will benefit renters who want to help their credit scores and landlords who want to attract renters who pay rent on-time."

There are some credit bureaus that take the use of alternative data a step further, employing things such as cable and internet payments and utilities bills as well as rent charges. For example, PRBC takes into account much more than the traditionally used payments. The alternative scoring bureau also counts subscriptions, utilities, rent, internet and cable, memberships and more. This provides creditworthy people whose banking and spending habits are unconventional with access to a solid credit score. 

Most people believe that including alternative payments such as rent or cellphone bills would improve their credit scores, according to experts. More than three-quarters of those surveyed stated that rental payments would be beneficial to the credit scores, and 79 percent revealed that they prioritize rent over other payments. Additionally, 67 percent said cellphone payments would boost their score, 68 percent said the same of cable bills and 69 percent indicated that the inclusion of utilities would improve their credit score. 

If you don't believe that your credit score is accurately reflective of your financial responsibility, look into alternative credit scores as a way to display your creditworthiness.