Renters who have their monthly payments tracked by credit bureaus are experiencing a significant boost in their credit scores, as per new data. This article discusses the positive impact of reporting rent payments on credit scores and the extended re...
Troy D. Hanson
November 14, 2023
Renters who have their monthly payments tracked by credit bureaus are experiencing a significant boost in their credit scores, as per new data. This data, provided by Fannie Mae and Esusu, a financial technology firm, reveals that tenants' credit scores have increased by an average of 39 points after property managers started reporting their payment histories to credit bureaus.
Moreover, this reporting has enabled many renters to obtain a credit score for the first time. The data shows that the rent payments made by 22,155 tenants who were previously "credit invisible" formed the foundation for a new credit score.
The improvement in tenants' credit scores is a direct result of a government policy implemented last year. In September 2022, Fannie Mae introduced a "Positive Rent Payment" pilot program that considers on-time rent payments as part of a borrower's credit report.
Credit scores play a crucial role in determining how well consumers manage their debt and their likelihood of repaying borrowed money. These scores impact an individual's ability to secure loans, the interest rates they receive, and the amount of debt they can take on. A higher credit score opens doors to financial milestones and provides greater flexibility when it comes to renting or even purchasing a home.
For property owners, the Positive Rent Payment pilot program aims to reduce tenant turnover and lower eviction rates.
Fannie Mae Extends Rent Payment Program
Fannie Mae has announced that it is extending its rent payment program through December 2024, in response to its significant impact on thousands of renters. Under this program, Fannie Mae will cover the cost for property owners who enroll. It has been revealed that 80% of renters would like their rent payments to be factored into their credit score, making this a highly sought-after initiative.
Positive Rental Payment History Boosts Eligibility for Homeowners
The Federal Housing Administration (FHA) has also recognized the significance of including positive rental payment history on credit reports for aspiring homeowners. By doing so, it can potentially boost their eligibility when applying for an FHA loan. There is a strong belief that regularly paying rent on time is a positive indication that mortgage payments will also be made promptly. Julia Gordon, the Federal Housing Commissioner, firmly supports this notion.
Esusu Reports Over 224,000 Renters Enrolled
Esusu, a fintech firm that reports on-time rent payments to credit bureaus, has reported that more than 224,000 renters are currently part of their program. This further emphasizes the increasing demand for initiatives that allow renters to establish credit scores.
Impressive Enrollment Figures Revealed by Fannie Mae
According to Fannie Mae, as of September 2023, over 100 property owners, 2,170 properties, and a staggering 435,000 units had been enrolled in the pilot program. These figures demonstrate the overwhelming interest and support for this initiative.
Partnership with Fannie Mae Leads to Positive Progress
Wemimo Abbey and Samir Goel, co-founders and co-CEOs of Esusu, have expressed their satisfaction with the progress achieved through their partnership with Fannie Mae. They highlight the remarkable milestone of more than 22,000 renters establishing credit scores through this program. Additionally, they emphasize the broader positive impact on renters' financial prospects, including improved access to high-quality auto, home, and student loan products.