Credit Score Usage: According to surveys, tenants are using their monthly rent payments to help them apply for loans.

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One of the most significant barriers to obtaining loans for young people is a lack of credit history to include on their applications. Many people, however, have found a way around this issue by having their rent payments reported to credit reporting agencies.

TransUnion has released two new surveys that reveal who is reporting payments and why.

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According to one of the surveys, which polled 353 multifamily property executives, more than one-quarter (27 percent) of property managers who are aware of the practice now report rent payments to credit reporting agencies, with nearly one-third doing so since January 2020. This is up from 17% in early 2019, when TransUnion conducted similar research.

The top reasons given by property managers 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 financially responsible residents (49 percent ).

"We've seen some progress in property managers adopting rent reporting in the last couple years, but there is clearly still room for the number of reporting companies to grow," said Maitri Johnson, TransUnion's vice president of tenant and employment screening, in a press release. "With a strong push from Gen Z renters, who currently make up a significant portion of the renter base, 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."

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In a separate survey of 2,039 renters aged 18 and up, more than three-quarters (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.

The story continues.

More than half of renters know their payments can be reported and are "somewhat interested" in having them reported. Sixty percent of Gen Z respondents are aware of and interested in having their rent payments reported. More than a quarter (27 percent) of Gen Z renters say their rent payments have already been reported, which is nearly twice the percentage of all renters.

Almost six in ten (59%) of respondents who have been renting for five years or less say they want their rent payments reported, compared to 47 percent of those who have been renting for more than five years.

Consumer advocates applaud the trend because establishing a strong history of making on-time rental payments — and having that history appear on credit reports — can help people improve their credit scores and make it easier to qualify for loans.

In a press release, Eric J. Ellman, senior vice president of Public Policy and Legal Affairs at the Consumer Data Industry Association, said, "Consumers should literally get credit for paying rent." "The more information the credit reporting system includes to prove a consumer's creditworthiness, the more consumers it can assist in obtaining fair and affordable credit."

GOBankingRates has more information.

This post first appeared on GOBankingRates.com: Credit Score Usage: According to surveys, tenants are using their monthly rent payments to help them apply for loans.


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