Research and Impact
Multiple studies demonstrate the positive impact and benefits of Rent Reporting for Credit Building.
Below are 4 key findings associated with rent reporting:
LOW RISK WAY TO BUILD CREDIT
Rent reporting provides a low risk opportunity, one of the few out there, for low-income renters to establish or improve their credit. Studies of multiple rent reporting programs have shown that rent reporting on average increases credit scores, particularly for those individuals with no or low credit scores or those with thin credit files.
While rent reporting is among the lowest risk ways to build credit, there are still potential associated risks. Learn more about those risks and how to mitigate them here.
POWER OF RENT REPORTING PILOT FINDINGS
Results from CBA’s Rent Reporting Pilot showed that after isolating the impact of a rental tradeline on participants’ credit reports:
of residents saw rent reporting as a good way to build their credit
CREDIT SCORE CHANGE
of residents experienced an increase in their credit score due to rent reporting by an average of 23 points.
UNSCORED TO SCORED
of residents who were initially unscorable became scorable at prime or nonprime levels.
U.S. Department of Housing and Urban Development Study
Results from a 2019 study released by the U.S. Department of Housing and Urban Development found similar results for residents of three public housing authorities:
- The rate of residents with no credit score fell from 49 percent to 7 percent using one score model and from 11 percent to 0 percent using another score model, nearly eliminating unscorability with the addition of the rental tradeline.
- The share of renters with a score above 620 increased by 65 percent after adding the rental tradeline. (A score of 620 or more will generally qualify consumers for most financial products including conventional mortgages.)
RESULTS CAN BE QUICK!
In a study conducted by TransUnion, approximately 80 percent of subprime consumers experienced an increase in their score one month into their new apartment lease. Nearly 41 percent of subprime consumers saw their VantageScore increase by 10 points or more after one month.
In addition, most rent reporting mechanisms can report back 24 months of rental payment history. This allows renters the potential to increase their length of credit history, a key factor impacting a credit score, virtually overnight.
In one pilot, 100 residents enrolled in rent reporting using RentTrack - a 3rd party rent servicer. Of the residents whose rents were reported for at least 2 months:
TIMELY RENTAL PAYMENTS
Rent reporting is an additional incentive for residents to pay their rent on time, which benefits both the property and the individual renter.
Rent reporting can incentivize residents to pay rent on time. A study by Transunion found that found that seven in 10 renters (73%) would be more likely to make on-time rent payments if property managers reported rent payments to a credit bureau. In addition, the Urban Institute simulated the predictiveness of rental payment on mortgage payments and found that it is likely a strong indicator of mortgage performance.
INCREASE IN ON-TIME RENTAL PAYMENTS
CLEVELAND HOUSING NETWORK
Comparing the year before implementing rent reporting with the first year of implementation, Cleveland Housing Network saw a 25% increase in on-time rent payments among residents participating in rent reporting.
ENHANCED PROGRAM PARTICIPATION & OUTCOMES
Housing providers often find that rent reporting enhances participation in other financial capability and other supportive programs. Thus, rent reporting is a promising strategy for affordable housing providers seeking to increase resident participation and success in financial coaching and asset building programs. Additionally, when combining financial coaching with rent reporting, the impact is shown to be even greater and increase residents’ connection to credit and its importance.
NALCAB COHORT FINANCIAL CAPABILITY FINDINGS
The National Association of Latino Community Asset Builders (NALCAB) and CBA worked with eight affordable housing providers serving Lantinx renters. All the housing providers reported that rent reporting created the opportunity to:
- Strengthen relationships with tenants to better understand their needs and how to support them
- Help residents identify their credit building goals and create a plan to achieve their goals
- Assist residents in reviewing, understanding, and addressing items on their credit report
- Refer residents to local financial institutions, community organizations, asset building opportunities, computer literacy classes and more!
"In addition to working on correcting my credit, I recently opened a bank account and secured a full-time job."
Resident of Home Forward (housing authority in Portland, OR)
Sources and Resources
- Credit for Renting: The impact of positive rent reporting on subsidized housing residents. Experian RentBureau, 2013. Found here: http://www.experian.com/assets/rentbureau/white-papers/experian-rentbureau-credit-for-rent-analysis.pdf.
- Expanding Credit Building Opportunities for Latino & Immigrant Renters. National Association of Latino Community Asset Builders, August 2020. Found here https://nalcab.org/wp-content/uploads/2020/09/Prudential-Rent-Reporting-Report_final-9.2.20.pdf
- Making Rent Count: How NYC Tenant Can Lift Credit Scores and Save Money. New York City Office of the Comptroller, October 2017. Found here: https://comptroller.nyc.gov/reports/making-rent-count/rent-and-credit-report/
- Potential Impacts of Credit Reporting Public Housing Rental Payment Data. U.S. Department of Housing and Urban Development submitted by Policy and Economic Research Council, October 2019. Found here: https://www.huduser.gov/portal/sites/default/files/pdf/Potential-Impacts-of-Credit-Reporting.pdf
- “Rental pay history should be used to assess the creditworthiness of mortgage borrowers.” Urban Institute, April 2018. Found here: https://www.urban.org/urban-wire/rental-pay-history-should-be-used-assess-creditworthiness-mortgage-borrowers
- The Power of Rent Reporting Pilot: A Credit Building Strategy. Credit Builders Alliance, 2015. Found here: https://www.creditbuildersalliance.org/wp-content/uploads/2019/06/CBA-Power-of-Rent-Reporting-Pilot-White-Paper.pdf.
- RentTrack Completes Six-Month Review of the Impact of Rent Reporting. RentTrack, 2015. Found here: http://www.renttrack.com/blog/renttrack-six-month-review-rent-reporting-impact/
- TransUnion Analysis Finds Reporting of Rental Payments Could Benefit Renters in Just One Month. Transunion, 2014. Found here: http://newsroom.transunion.com/transunion-analysis-finds-reporting-of-rental-payments-could-benefit-renters-in-just-one-month.
- TransUnion Research Finds Rent Reporting Will Motivate Seven in 10 Renters to Make More On-Time Payments. Transunion, 2019. Found here: https://www.globenewswire.com/news-release/2019/06/26/1874348/0/en/Rent-Reporting-Will-Motivate-Seven-in-10-Renters-to-Make-More-On-Time-Payments.html?print=1
- Utility, Telecommunications, and Rental Data in Underwriting Credit. Urban Instiute & FinRegLab. December 2021. Found here: https://finreglab.org/alternative-data-in-underwriting-credit/utility-telecommunications-and-rental-data-in-underwriting-credit