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What if sending a money order by Western Union could help you build your credit score? Taking information about international money transfers and applying it to consumers’ credit reports might help people improve their credit faster, according to a 48-page study published Wednesday by a new federal watchdog agency.

The idea might sound far-fetched. Few people have even studied how international money orders might be accounted for on credit reports and potentially factored into credit scores, according to the Consumer Financial Protection Bureau.

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But the idea has merit and should be studied more, the bureau’s report found. About six million people in the U.S. send tens of billions of dollars to family, friends and business abroad every year. Many are recent immigrants who haven’t had time to build up extensive credit histories.

Adding such payments to credit reports could help them show they can be relied upon to repay their debts, according to the report.

“A pattern of remittance transfers may indicate that a consumer is able and willing to make regular payments to meet a financial obligation, such as a loan,” the bureau found.

There are barriers to including money transfers on credit histories, including the upfront cost to lenders and credit agencies to change their forms and business structures. Those costs could be offset by lenders using the information to find millions of potential new borrowers, the report found.

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Image: Aaron Harmon, via Flickr

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  • tonyg34

    WU is not depository financial institution and does not make loans, nor does it withhold funds transferred in remittances in depository accounts or earn interest on said transferable accounts. The implication that, “Those costs could be offset by lenders using the information to find millions of potential new borrowers, the report found” is incredulous. The CFPB is basically asking to WU to pay for providing their competitors with proprietary customer information for the purpose of undermining WU’s core business of transacting international remittances. In addition to which the CFPB has also alluded to regulating a cap on transaction fees similar to the cap on swipe fees imposed on credit card processors. Financial regulatory reform and oversight has its place but it is not the job of government to artificially undermine an entire industry. WU serves under-banked customers, the people who do not have access to traditional bank accounts. They have created a business out of providing services to customers that traditional banks consider too risky to deal with and now Dodd-Frank have taken it upon themselves to determine how much they can charge for assuming those market risks.

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