The Power of Rent Reporting
Pilot underwritten by the Citi Foundation reveals positive benefits to low-income tenants from the reporting of their rent payments to a major Credit Bureau
WASHINGTON, March 25, 2015 /PRNewswire/ -- Credit Builders Alliance (CBA) today revealed the results of its Power of Rent Reporting multi-year initiative. This pilot program worked with eight (8) affordable housing providers (AHPs) to report the monthly rental payments of their tenants to Experian Rent Bureau. Building a credit history is of paramount importance to tenants living in affordable housing who may live outside of the financial main stream.
It is a fact that marginalized individuals without a credit history (termed "credit invisible") often pay higher deposits for services such as cell phones and utilities. A good credit score can save a person a significant amount of money in interest and fees over the course of a lifetime1. Many auto and property insurers price their products in part based on credit histories. And a mortgage or small business loan applicant's credit history could be the difference between obtaining a loan that provides him or her with the opportunity to build a major asset or no loan at all.
"Today, more than one-third of Americans rent their homes, a ratio that has increased since the start of the Great Recession. Although not making housing payments can damage the credit of homeowners just as much as it damages the credit of renters, historically only homeowners have been able to build positive credit histories when they make mortgage payments on time," said Dara Duguay, Executive Director, CBA.
Experian's decision in 2010 to include positive rental payment data on traditional consumer credit reports after acquiring RentBureau, a specialty credit reporting agency comprised of rental payment information, was crucial in creating this opportunity. The rental tradeline is factored into VantageScore and the most recent version of the FICO credit score.
"Experian's goal is to continue helping consumers achieve greater inclusion and participation in mainstream financial services," said Emily Christiansen, Director of Experian RentBureau. "The results of this pilot are promising and further demonstrate how data can be used for good and can impact the lives of many."
As a result of the Pilot, CBA found that:
- Rent reporting is perceived by renters as a good opportunity for credit building. 97% of residents who responded to a Pilot survey stated that paying rent on time is a good way for them to build their credit.
- Rent reporting offers a significantly impactful credit building opportunity to residents living in affordable housing. After isolating the impact of the inclusion of the rental payment history on participants' credit scores we found:
- All (100%) of residents in the Pilot who initially had no credit score2 had either a high nonprime or prime score with the inclusion of their rental payment history.
- A large majority (79%) of Pilot participants experienced an increase in credit score with an average increase of 23 points.
- Rent reporting in combination with financial coaching can incentivize residents to increase their rates of on-time rent payment.
"The Citi Foundation has long supported organizations like Credit Builders Alliance that test innovative approaches to improve the financial well-being of low-income individuals," said Daria Sheehan, Senior Program Officer, Citi Foundation. "We're pleased to learn how rent reporting can positively build credit scores for tenants who pay their rent on time and hope more affordable housing organizations will offer this credit building opportunity to their residents."
CBA is extremely encouraged by the progress that has occurred over the past three years due in major part to effective cross sector collaboration between the nonprofit affordable housing industry, national for-profit credit reporting agencies, and public departments and agencies from the national to city level. We are confident that as rent reporting gains traction and more AHPs implement and evaluate rent reporting for credit building initiatives, their results will bolster and expand on those produced by this Pilot.
About Credit Builders Alliance
CBA is an innovative non-profit social enterprise dedicated to building the capacity of a diverse and growing network of hundreds of nonprofits (CBA members) that help low- and moderate- income households build strong credit and other financial assets. CBA serves as a unique and vital bridge between its members and the major credit reporting agencies (CRAs), and through its core services - CBA Reporter and CBA Access - provide nonprofits with both the ability and critical technical assistance to report loan data to the CRAs and to pull low-cost client credit reports for the purposes of financial education, outcome tracking, and underwriting. In addition to these services, CBA offers a wide range of practitioners' hands-on credit building trainings, innovative tools, and forums for sharing with and learning from each other.
1 It has been estimated that a 100 point difference in FICO scores could save the person with good credit approximately $200,000 over her lifetime, based on a simulation comparing two consumers with student loan, credit cards, auto and mortgage debt. Liz Weston, "Lifetime Cost of Bad Credit: $201,712." October 13, 2011.
2 VantageScore 3.0
Contact:
Sarah Chenven
Director of Programs and Strategic Initiatives
Credit Builders Alliance
1 202 888 7585
[email protected]
SOURCE Credit Builders Alliance
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