Credit Score Usage: Surveys Show Tenants Are Using Monthly Rent Payments To Help Apply for Loans
For young people, one of the biggest roadblocks to getting loans is that they don’t have much credit history to put on their applications. But many have found a way around that problem by having their rent payments reported to credit reporting agencies, according to a pair of new surveys from TransUnion.
One of the surveys, which polled 353 multifamily property executives, found that more than one in four property managers (27%) who are aware of the practice now report rent payments to credit reporting agencies, with nearly one-third doing so since January 2020. That’s up from 17% in early 2019, the last time TransUnion conducted similar research.
The top reasons property managers cite for reporting rent payments to credit agencies are to help residents build credit (80%), to encourage residents to pay on time (71%) and to attract residents who are financially responsible (49%).
“We’ve seen some progress in property managers adopting rent reporting in the last couple years; however, there is clearly still room for the number of reporting companies to grow,” Maitri Johnson, vice president of tenant and employment screening at TransUnion, said in a press release. “With a strong push from Gen Z renters, who make up a significant portion of the renter base today, we’ll likely see reporting become an industry standard — and as a result, a critical mass of renters who can elevate their standards of living through greater access to credit.”
A separate survey of 2,039 renters ages 18 and above found that more than three-quarters of respondents (77%) said they would be more likely to pay rent on time if they knew their rent payment history would be reported to credit reporting agencies.
More than half of renters are aware that their payments can be reported and are at least “somewhat interested” in having them reported. Among Gen Z respondents, 60% said they are aware of and interested in having their rent payments reported. More than one-quarter (27%) of Gen Z renters say they already have their rent payments reported — nearly twice the percentage of renters as a whole.
Nearly six in 10 (59%) of respondents who have been renting five years or less say they are interested in having their rents payments reported, compared to 47% of those who have been renting more than five years.
Consumer advocates welcome the trend because building a strong history of making rental payments on time — and having that history appear on credit reports — can help people strengthen their credit scores and smooth the path to qualifying for loans.
“Consumers should literally get credit for paying rent,” Eric J. Ellman, senior vice president of Public Policy and Legal Affairs at the Consumer Data Industry Association, said in a press release. “The more information the credit reporting system includes to prove their creditworthiness, the more consumers it can help access fair and affordable credit.”
More From GOBankingRates