Experian's latest analysis uncovers how the addition of rental payment data to credit files can help financially excluded consumers gain access to traditional financial services 100 percent of the previously unscoreable study participants now credit scoreable with the majority falling in the least risky prime category
COSTA MESA, Calif., July 31, 2014 /PRNewswire/ -- Experian®, the leading global information services company, today announced its recent report on the impact of positive rent reporting on subsidized housing residents. Experian was the first credit reporting agency to incorporate on-time rental payments to its database. To show the value of adding alternative data to credit files, Experian conducted an analysis to examine how rental tradelines impact credit file thickness, risk segment migration, credit scores and the ability to score previously unscoreable residents.
"'Financial exclusion' is a term that describes the lack of access to basic financial services. Being denied the opportunity to have low-cost loans or even a bank account is a reality for many Americans, and they are forced into using alternative services to conduct simple transactions," said Brannan Johnston, vice president and managing director, Experian RentBureau®. "Adding on-time rental payments to credit files may help those who operate primarily on a cash basis to integrate into the banking system and establish a credit history that they can leverage to receive more affordable credit and improve their economic well-being."
Additional findings from the Credit for Renting whitepaper confirm:
- The average VantageScore® 3.0 score change for previously scoreable participants in the study was an increase of 29 points
- 95 percent of study participants experienced a score increase or no score change with subprime and nonprime residents receiving the greatest positive score impact
- 19 percent of study participants previously considered subprime migrated to at least one higher (less risky) risk segment, typically yielding more affordable credit and additional credit opportunities
- 23 percent of thin-file residents migrated to the thick-file category, potentially signaling to a lender the ability to manage multiple credit obligations
- 97 percent of the previously no-hit (and credit unscoreable) residents fell in one of the two least risky risk segments with the addition of the paid-as-agreed rental tradelines
"Consumer financing rapidly changed during the economic upheaval, and regulatory changes forced lenders to tighten the standards for the underwriting process. This excluded many Americans from the opportunity to attain credit due to a limited or no credit history," said Genevieve Juillard, president of Experian Consumer Information Services. "For the last decade, Experian has advocated for full-file reporting and invested in new sources of data outside the traditional sets, such as Experian RentBureau, to help expand credit files. Residents who pay their rent on time month after month should be rewarded and not overlooked simply because they rent instead of own the place they call home."
To conduct the analysis, Experian RentBureau gathered rental payment data from the Experian RentBureau database which is comprised of both positive and negative rental payment data. Experian incorporates the on-time rental payment data reported to Experian RentBureau into Experian credit reports. Nearly 20,000 leases, as reported by property management companies to Experian RentBureau, were found that met the desired criteria, including the receipt of housing subsidies on the lease and positive lease payment behavior. Subsidized leases with negative rental payment history specifically were excluded from the analysis. The addition of these leases to the Experian credit database then was simulated.
A complimentary download of the full report is available here: http://ex.pn/1uET659
Experian consumer education resources
For more than 20 years, Experian has been committed to helping consumers build a positive credit history by providing products and services that help consumers manage their credit reports and credit scores better, so they can get the credit they need when they need it.
Consumers can connect with Experian and learn more about credit in other ways, including by:
- Joining the #CreditChat, hosted by @Experian_US on Twitter with financial experts and consumers every Wednesday at 3 p.m. Eastern time
- Visiting Experian's help site for answers to common questions, advice and education about consumer credit
- Asking credit questions on Experian's Facebook page at https://Facebook.com/ExperianUS
About Experian RentBureau
Experian RentBureau is the largest and most widely used database of rental payment information and currently includes information on more than 12 million residents nationwide. Property management companies and electronic rent payment processors report rental payment data directly and automatically to Experian RentBureau every 24 hours. This detailed rental payment information enables organizations to make better informed decisions. Property management companies utilize this data to screen new rental applicants' payment history as part of their existing resident screening services. Experian is the first major credit reporting agency to incorporate the positive rental payment data reported to Experian RentBureau in consumer credit reports, enabling residents to build credit history by paying rent responsibly.
To learn more about Experian RentBureau, visit www.experian.com/rentbureau.
For renters interested in building credit history through rental payments,
please visit www.experian.com/buildcredithistory.
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2014, was US$4.8 billion. Experian employs approximately 16,000 people in 39 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and Sao Paulo, Brazil.
For more information, visit http://www.experianplc.com.
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VantageScore® is a registered trademark of VantageScore Solutions, LLC.
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