What You Need to Know About Rent Reporting
Traditionally, we think of credit as a potential obstacle for a finite list of goods and services, like buying a car or home. However, credit is increasingly a barrier to access products, services, capital and even employment. Landlords, mortgage lenders, utility providers and even employers use your credit to predict your future financial responsibility.
According to the Consumer Financial Protection Bureau (CFPB), roughly 45 million households in America have no credit score. Of the 190 million people who have credit scores, about half have a low score (subprime). Poor credit especially hurts low-income families and households of color, who either pay significantly more for higher-cost credit or are locked out of the credit market entirely.
A promising solution to this is 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. This gives individuals with poor or no credit an opportunity to build up their credit without taking on additional debt, applying for a new product or making another monthly payment.
Most families stand to gain from this form of inclusive credit reporting. More than a decade’s worth of evidence supports the inclusion of rent, utilities and phone payments, and studies indicate that households earning less than $20,000 per year experienced the greatest boost to credit access when utilities and phone payments were included. This is a particularly important opportunity for households of color to build wealth.
Rent reporting can be further supported with financial capability. Evidence from government and nonprofits service providers shows that embedding programs to improve financial capability—such as helping families access financial information, connecting families to safe and affordable financial products and services, building savings and wealth and teaching them to protect themselves in the financial marketplace—boosts programmatic outcomes.
Combining financial capability services with rent reporting programs provides an opportunity for organizations to engage residents in a positive manner around their finances. When done effectively, residents become more confident in planning for their financial future, gain access to safe and affordable housing and begin building assets.
While many housing practitioners are aware of the value of credit building and financial capability, implementing a rent reporting program seems too difficult to achieve or not worth the potential risks. However, there are resources and potential partners to help simplify the process of program design and implementation. They can also provide guidance regarding participant selection and providing financial capability services to residents after enrollment.
Want to know more? Start with the following walkthroughs of rent reporting prepared by Prosperity Now partners including the Credit Builder’s Alliance, Housing Authority of Clackamas County and Innovative Changes.
The evidence supporting rent reporting as an effective credit-building solution for low-income renters with limited or no credit. Read more
Here’s what a housing authority in Oregon learned after it implemented rent reporting for the first time. Read more
How offering financial capability services with rent reporting programs can enhance the benefits of inclusive access to credit. Read more
The main barriers organizations face to implementing rent reporting, and how technology partnerships can ease those barriers. Read more