Evaluating Rent Reporting as a Pathway to Build Credit
In the first randomized study of rent reporting—the inclusion of housing rental payments in credit data—we show that this practice can help people get a credit score for the first time or improve their score. It is exceedingly difficult to get by in the US economy without participating in the credit system. People with higher credit scores are typically offered a range of credit products with competitive interest rates, and accessing debt and making payments on time helps further boost their credit scores. Yet many people have fewer or less favorable forms of credit available to them and thus find themselves unable to build their credit records.
We partnered with Credit Builders Alliance, a nonprofit seeking to bridge the gap between nonprofits and credit bureaus to help people with poor or no credit participate in the mainstream financial system; Esusu, a technology platform that facilitates rent reporting; TransUnion, one of the country’s major credit agencies; and a group of nonprofit affordable housing providers. We evaluated “opt-in” and “positive-only” reporting, wherein rent is only reported for tenants who sign up and missed or late rental payments are not reported. Housing providers offered tenants at each housing development in the study the chance to participate. We divided enrollees into two groups: a treatment group whose rent could be reported as soon as the enrollment and set-up period were complete and a waitlisted control group whose rental payments could be reported four months later. We compare outcomes for the treatment and waitlist groups during this period, which should be a sufficient length of time for primary, short-term outcomes to appear. The final research sample includes 269 renters, with 141 in the treatment group and 128 in the waitlist group.