Verizon's 'free gift' to customers: Giving payment data to credit bureaus

Verizon Communications Inc. has begun reporting to the nation's three credit bureaus which Massachusetts customers pay their bills on time and which ones don't, a practice a company spokesman described as ''a free gift to the public."

The telecommunications giant says its reports to Equifax, Experian, and TransUnion will help consumers with limited credit histories build a payment record that can be used to secure lower rates on mortgages, credit cards, and car loans.

But there's a flip side to this ''free gift" from Verizon. Those who don't make their phone payments on time will end up with a black mark on their credit history. A Verizon spokesman acknowledged the idea of sharing payment data originated with the company's bill collection people as a way of spurring customers to pay on time.

''It's not a very big stick, but it's a stick," said spokesman James Smith.

Consumers with unlisted phone numbers are also upset their numbers are being shared with credit bureaus. A check of my credit reports showed that TransUnion identifies Verizon customers by their complete phone number. Reports from Experian and Equifax identify Verizon customers by their phone numbers minus the last digit.

One Stoneham resident, who asked not to be identified because his identity had previously been stolen, said he was shocked to see his unpublished phone number, minus the last digit, on his Equifax report.

''It doesn't take a rocket scientist to figure out what that last number is," he said. ''I'm paying them $5 a month to maintain a nonpublished number. Who else has access to this database?"

The Massachusetts Department of Telecommunications and Energy sent a letter to Verizon earlier this month asking for more information about the company's sharing of payment data, including its handling of unpublished numbers. Karen Robinson, director of the agency's consumer division, asked Verizon to cease sharing the data until the DTE's concerns are resolved.

Smith, the Verizon spokesman, said the company will respond to the telecommunications agency but is continuing to share information with the credit bureaus. He said the agency's letter was perceived as an inquiry, not an order.

Most of the items that show up on a consumer's credit report are from companies that offer credit, primarily banks, credit card companies, and mortgage firms. Verizon is the first telecommunications company to submit monthly payment data. A handful of utilities, but none locally, are also doing it.

''It's fairly new," said Susan Henson, an Experian spokeswoman, referring to the nontraditional suppliers. ''They have really given a lot of consumers the chance to build credit."

The Information Policy Institute, a New York think tank that has produced a number of reports on credit issues, estimates 35 to 54 million people, mostly minorities, young adults, and women, don't have enough information in their credit files to generate a credit score, which is used by lenders to determine eligibility and pricing for loans.

Approximately 35 percent of a credit score is determined by an individual's overall payment history. Michael A. Turner, president of the Information Policy Institute, said the institute is currently studying the credit files of 14 million people to gauge the impact of payment records from a nontraditional supplier.

''We expect the vast majority of people will benefit," Turner said. ''We know that this data is predictive of default."

Turner predicts more companies that receive regular payments from customers will eventually follow Verizon's lead because reporting payment data to credit bureaus tends to reduce customer delinquencies dramatically.

A spokeswoman for Nicor Gas, a utility in the Chicago area, says the company's delinquencies have dropped by more than 20 percent since 1998, when it began reporting customer payment data to the credit bureaus.

Smith said Verizon hopes its reporting of customer payments will improve the behavior of slow payers and reduce collection agency expenses, but he stressed that most customers pay their bills on time and the new policy will benefit them. He noted that customer data were referred to credit bureaus previously only when the customer was referred to a collections company.

Verizon had hoped to receive compensation from the credit bureaus for supplying payment data, but Smith said that hasn't happened yet.

Like other credit bureau suppliers, Verizon reports when an account was opened, the existing balance, the amount past due, and the account status. Verizon currently supplies information for wireline customers only, but if wireless and other services are included on the same bill they are also included, Smith said.

Credit reports are confidential, but they are distributed widely as part of credit checks, and their security is occasionally compromised. Smith offered little solace to the Stoneham resident who complained about his unpublished number being turned over to the credit bureaus.

''Technically, maybe he has something to complain about, but this is his account number," he said.

Smith declined to say when Verizon reports a customer for failing to pay on time, saying all customers would wait until the last minute if the deadline time was published in the newspaper. On my recent bill, dated May 8, the payment due date was a month later on June 8.

Bruce Mohl can be reached at mohl@globe.com.