Multifamily owners and operators aren't strangers to sharing data. For decades, apartment communities have swapped information about occupancy rates and actual rents to compile market surveys of their competitive set.
At first glance, it might appear odd to the outside world that properties would so readily exchange this information. But owners and operators understand that everyone benefits when everyone has a clear-eyed understanding of the conditions in their competitive set and their submarket.
The same could be said for sharing their residents' positive rental payment histories with credit bureaus. By doing this, they are providing their renters with a powerful avenue for improving their financial well-being.
A strong, positive credit history is essential to securing car loans, credit cards and mortgages – and to doing so at favorable interest rates. Unfortunately, unlike homeowners, apartment residents traditionally have not gotten credit on their credit reports for making their rent payments on time and in full, even though these payments are often quite large and typically make up their largest monthly expense.
Renters are seven times more likely to be credit invisible – meaning they lack enough credit history to generate a credit score – when compared to homeowners, according to the Credit Builders Alliance (CBA). The fact that rent payments typically don't help build credit history also is particularly harmful to lower-income households and communities of color. Renters make up approximately 60% of the U.S. households that make less than $25,000 a year, while Black and Hispanic households are twice as likely as White households to rent, CBA says.
Building Financial Well-Being
While operators sharing their residents' positive rental payment histories with the credit bureaus may not yet be the industry norm, there is already clear and compelling evidence of the impact this can have on a renter's financial health.
In CBA's Power of Rent Reporting pilot, 100% of renters who started off with no credit score became scorable at the near prime or prime level. In addition, residents with sub-prime scores saw their score increase by an average of 32 points.
Because of results like these, California lawmakers passed Senate Bill 1157, which became law on July 1, to provide lower-income renters with a powerful engine for economic mobility. The law requires affordable housing providers of a certain size to implement rent reporting for their residents.
More and more, it's becoming obvious that simple fairness demands that a positive rental payment history should help a consumer build their credit history. This is especially important for marginalized and low-income residents, who, like renters across the economic spectrum, consistently display responsible money habits. They pay for rent, utilities, smartphones and streaming services — all in a timely manner.
The time is now for apartment owners and operators to open the doors to financial inclusion and opportunities to apartment renters. Doing so can offer a competitive advantage over other properties and is simply the right thing to do.
When owners and operators open these doors, renters will walk right through.