Amplifying the Effects of Rent Reporting with Financial Capability
Editor’s note: This is the third of a series of blog posts published by Prosperity Now’s Affordable Homeownership team about rent reporting: the monthly reporting of tenant rent payments to at least one of the major consumer credit bureaus for inclusion on consumer credit reports. Previously, we discussed why rent reporting is a pathway to good credit and what it takes to implement it. This post was provided by Innovative Changes, a Community Development Finance Institution (CDFI) that provides financial education.
Be sure to join us on April 2, 2019 at 2 pm ET for a webinar on rent reporting featuring Credit Builders Alliance, AHC Greater Baltimore and more! Register today.
Traditionally, we’ve thought of assets as owned possessions: a home, a car, money in a bank account. Yet more people are starting to realize that their credit profiles—that seemingly simple document outlining our history with debt, and the little three-digit number that goes with it—should be counted among assets. Given that financial capability often espouses the virtues of less debt, it begs the question: How do we reconcile people’s desire to avoid debt with the importance of building credit?
Fortunately, rent reporting addresses this conundrum. By facilitating credit building without taking on additional debt, rent reporting allows people who may otherwise have little or no credit history to improve or establish credit. In some areas, rent reporting has become a proven model for the success of wraparound financial capabilities services.
Research shows that the positive effects of social services are amplified when integrated with financial capabilities work. Participants of financial assistance and asset-building programs also experience enhanced long-term improvements when deeper financial education was part of these programs. For example, the Oregon IDA Initiative requires participants to complete financial education requirements to improve long term outcomes.
At Innovative Changes (IC$), we have emphasized the importance of credit since 2009. We launched our Credit Builder Program in 2010, combining a secured credit builder loan with education and coaching. We also piloted the Credit Building IDA, which combined the powerful financial education and asset-building strengths of matched savings with a credit builder loan to improve participants’ purchasing power.
Our longtime partners, such as Home Forward (formerly the Housing Authority of Portland) and Credit Builders Alliance (CBA), understand that combining effective financial education with other services improves outcomes for families over time. When Home Forward launched a rent reporting pilot at its Stephen’s Creek property with CBA’s help, it made sense to bring IC$ into the pilot to provide financial education.
IC$ used our experience developing curriculum and credit building to structure a series of workshops. We already offer a series of four classes to the general public: the Financial Household Resiliency Series, or FHR. For rent reporting, our goal was to create workshops that covered the basics of credit, including credit building and debt management. We also included traditional elements of financial education, like budgeting. Ultimately, we settled on offering the FHR series, followed by a four-part credit-specific series: Introduction to Credit and Rent Reporting, Disputing Errors, Negotiating with Creditors and Building and Protecting Credit.
When developing workshops for Rent Reporting, strong partnerships are imperative. The dedicated resident services staff at Stephen’s Creek already had great relationships with the resident community, which helped secure resident participation. This makes sense when one considers the intersection of services already offered by many housing authorities at their properties—folding in rent reporting and its attendant workshops is a natural fit. With their support, 56 residents took part in the first cohort, and 46 of those participants attended the first workshop.
As for the curriculum, we knew we wanted to include a classroom education portion, but we also wanted people to have a chance to workshop their own credit reports and ask questions. For that reason, we settled on a structure of a 20 to 25 minute lecture with 35 to 40 minutes for participants to review credit reports, ask facilitators for individualized help and apply what they learned.
One of the most surprising positive outcomes of these workshops was the way it brought residents together. The strength of the resident community was clear from the way people worked together, shared their own strategies, helped translate for non-English speakers and formed friendships that lasted throughout the workshop series.
Despite the overall success of the pilot, there were hiccups along the way. For example, we initially planned to offer the introductory workshop at a variety of times: evenings, weekends and afternoons. However, only one participant attended the afternoon workshop, and weekends didn’t work for staff. This showed us the importance of flexibility—we were not rigidly determined to follow one particular path, we were able to adjust and add an additional evening workshop in place of the unpopular afternoon time slot.
Since the success of our first cohort at Stephens Creek, IC$ partnered with Home Forward on a second cohort, followed by a second property. Throughout, we have continued to learn and adapt to the communities we serve with the help of our partners.
Poor credit is both an indicator and a cause of financial hardship. Rent reporting is an effective way to help residents improve their financial futures while adding an incentive for on-time rent payment. But the real power of financial capability is in combining rent reporting with workshops and/or coaching. In this way, housing authorities, nonprofits and even private landlords can magnify the effects of improved credit and create stronger, more resilient communities.
Join the Affordable Homeownership Network to learn more about financial services integration and Prosperity Now’s work to make homeownership affordable for everyone.