Ownership has its privileges. “Homeowners get a positive bump on their credit score,” with every mortgage payment that they make, notes Devin Thompson, director of institutional advancement for Jubilee Housing, an affordable housing group based in Washington, D.C. Renters miss out on that benefit, largely because there are no systems in place for sharing data across the fragmented rental market. To correct this disparity, Jubilee is piloting a program that enables residents to arrange for the automatic reporting of their rent payments to credit agencies.
Rent reporting is one of several emerging strategies to help Americans who have a thin credit file or a poor credit score. An estimated 100 million people fall into that category. “That’s 40 percent of American adults who are going to struggle with access to affordable credit,” says Rob Levy, a program director at the Center for Financial Services Innovation, a Chicago-based research organization. “Their credit score is impacting [their] lives in hundreds of ways,” he says. In most states, for example, employers have the right to run a credit check on job applicants.
Jubilee Housing, which provides housing and other services to 850 individuals and families in the Adams Morgan neighborhood of Washington, D.C., launched its rent-reporting pilot in February. The initiative is part of Platform of Hope, a broad poverty-fighting coalition that includes several nonprofits in the greater D.C. area.
“For us, rent reporting is a no-brainer,” says Renise Walker, director of resident life at Jubilee Housing. “We see how few opportunities there are for [low-income] people to build credit.” Yet the logistics of managing rental data can be daunting. “We’ve had to make sure the technology works so that rental information can fl ow to the credit bureaus. It’s a heavy lift at first,” Walker says.
Resources are now available that aim to make that process relatively seamless. “As more payments are becoming electronic, [those] data can be incorporated into your credit report,” Levy says. Consumers, for instance, can sign up for Rental Kharma, an online rentreporting service. (The catch, though, is that their landlords must participate in the service as well.) And TransUnion, one of the three leading US credit agencies, last year rolled out a product called ResidentCredit, which enables landlords to report rent payments to that agency. The big challenge now, according to Levy, involves “getting lenders to use [digitally reported] data in decision making.” In many cases, banks and other financial institutions need to update their systems to incorporate rental reports. They also need to “be comfortable using that information,” Levy notes.
Rent-reporting programs, says Levy, “are part of a larger story about the inclusion of nontraditional data into credit reports.” These alternative data can also include utility and mobile-phone payments. A company called eCredable, for example, enables consumers to establish a credit record merely by paying routine bills. One benefi t of the eCredable service is that it lets consumers demonstrate creditworthiness without taking on debt.
For Jubilee Housing, efforts to support low-income people extend beyond helping them with their credit records. Through Platform of Hope, Jubilee and its partners are pursuing strategies that also include financial literacy education, matched savings programs, and job placement services. “It’s all about helping people attain financial stability,” Walker says.
Carlton White, a 44-year-old US military veteran, is taking advantage of those off erings. Lung disease landed him in the hospital for four months in 2014. “I lost my place [to live] and the car I’d been making payments on,” he says. But through Jubilee Housing, he found an efficiency apartment, and he now meets with a Jubilee-funded financial counselor every month to work on budgeting and goal setting. Rent reporting, combined with a new saving habit, is helping to improve his credit score.
“My goal is to bring up my score so I can use my VA [Veterans Affairs] benefit to buy a house,” White says. He has teenage children and wants to have enough room to host them. In the meantime, he’s sharing lessons with his kids that he wishes he had learned earlier. “I went from high school right into the military,” he explains. “Back then, everybody wanted to give me credit: ‘You can have this now and pay for it later.’ That sounds good when you’re young. I didn’t understand anything about interest rates and finance charges. But I do now.”
Read more stories by Suzie Boss.