Renters Get Help with Credit Scores

February 3, 2011

Angling to further cast its credit reporting net, Experian is taking a closer look at the payment habits of renters. But it's only going to report positive data.

Here's the reasoning: including positive rental history information in their credit report is important to assessing the creditworthiness of folks who don't have mortgages, or worse, have suffered financial hardships (e.g.: foreclosures). According to Experian, continuous rental payments can help to qualify these individuals (often referred to as having "thin" credit files) for extensions of credit, as well as for new lease agreements.

"Given that one-third of the country rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent," explained Brannan Johnston, vice president and managing director of RentBureau, a national rental data network acquired last year by Experian. RentBureau manages data on about 8 million renters.

The National Multi Housing Council estimates there are nearly 96 million Americans today who pay rent yet don't receive "credit" for their positive payment histories. (And let's face it, rents are often equal to if not more than typical mortgage payments these days.) Historically, only a "subset of negative activity" was forwarded to credit reporting agencies, said Experian.

The move isn't just for consumers; it should benefit lenders, as well, Eperian said. Banks, for example, can update underwriting procedures to automatically capture a consumer's rental payment obligations, and get a better handle on the ability of emerging consumers to keep up with monthly obligations.

"Including rental payment data in the credit file is a groundbreaking win for consumers and our vision of full reporting. Many consumers feel that building credit is an uphill battle, but this approach gives renters credit for managing the payments for the place they call home," said Steven Wagner, President, Experian Consumer Information Services.

Experian is one of three national credit reporting agencies that lenders use to help assess the creditworthiness of prospective borrowers.

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_{-Financial Access database}