Among the legacies of the Great Recession has been a shift in the housing market, with renters representing a much bigger share than any time . Nearly 37 percent of U.S. households are now renters, up from 31 percent in 2006, census data show.
Like people who have a mortgage, renters are expected to make timely and complete payments in order to keep a roof over their heads.
But when it comes to calculating credit scores, there’s a world of difference between buyers and renters.
“Unlike homeowners, renters don’t get credit for the biggest payment they make on a regular basis,†said Sarah Chenven, chief operating and strategy officer at the Washington-based Credit Builders Alliance. “With rent reporting, a renter will have the opportunity to build credit without having to take on additional debt.â€
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Chenven and others who advocate for low- and moderate-income households recently joined affordable housing professionals and employees of credit rating firm Equifax in ºüÀêÊÓƵ to look at ways to get more landlords and renters to begin reporting rental payment data.
“There’s a national effort to have rent payments count toward your credit,†said David Stiffler, vice president of global corporate social responsibility at Equifax’s ºüÀêÊÓƵ-area office. “It’s just a fractured collection environment. That’s the nut that’s got to be cracked. It’s not easy.â€
Chenven said residents found that nearly 80 percent of participants saw improvements to their credit scores, and everyone who didn’t previously have a credit score received one after reporting rental payments.
“Is it a good credit-building strategy that we should really be reporting and working on?†Chenven said. “The answer is yes.â€
While rental reporting applications and services such as RentTrack and Cozy have begun popping up in recent years, they’re often geared toward market rate apartments.
Starting this month though, landlords who use the Tower Grove Neighborhoods Community Development Corp.’s can begin collecting rent through a new service the nonprofit launched in partnership with New York payment processing firm . Tenants would pay a small processing fee of $2 to $4 per rent payment.
The Tower Grove Neighborhoods CDC has developed a reputation over the years for its work promoting good rental management and its tenant background check services. Executive Director Sean Spencer said it’s taken too long for organizations to realize how helpful getting rental data into the hands of credit agencies can be for households to build good credit profiles.
It’s hoping to get many of the landlords it works with in the neighborhoods surrounding Tower Grove Park and elsewhere in the city to sign on and tell their tenants, pitching them easier and faster rent collection through the online application.
“We’re looking at this from a nonprofit standpoint, from a community development standpoint,†Spencer told the Post-Dispatch. “It really comes down to educating the landlords.â€
Stiffler, at Equifax, said the credit reporting agency hopes to expand the joint HomeScreen and MoCaFi application to other nonprofit affordable housing organizations around the country that serve populations that have traditionally been harder to gather credit data on. Spencer said the Tower Grove neighborhood group is already working with a similar organization in Atlanta on using the application.
For prospective tenants that have spotty rental or credit histories, the goal is to pair the rent reporting applications with financial assistance nonprofits. Tower Grove CDC, for instance, works with local financial services nonprofit Prosperity Connection, referring rental applicants with less-than-stellar credit histories to the organization.
“They know how it’s going to help communities,†Spencer said of Equifax. “It’s also a business proposition.â€
Other cities have looked at legislative solutions to begin moving toward more rent reporting. Locally, initial conversations have started with organizations like the ºüÀêÊÓƵ Housing Authority and local governments. Urban Strategies President Esther Shin said her organization, which coordinates social services in low-income housing communities and helped organize the conference in ºüÀêÊÓƵ this week, is starting to talk to the property managers it works with about collecting rental payments.
She said reporting rental history seems to be a net positive for most tenants.
“When you get a mortgage on your home, you don’t get to opt out,†Shin said. “If we want the information to be useful, we have to report both.â€