Pay Rent, Build Credit

"It's about empowerment, and really showing tenants that there is a way to take what you are already doing and turn that into an asset to pursue your financial goals," says Dallas Lenear, the Executive Director of Project GREEN, and a local advocate of Rent Reporting for Credit Building. A credit score is a powerful tool used by various financial organizations to determine a borrower's trustworthiness. Banks and other institutions also use credit scores to determine elements such as the interest rates on loans and credit cards, insurance premiums, or deciding whether someone will pay a deposit on an apartment or cell phone. When it comes to raising your credit score, Lenear says that rent reporting is a "No brainer," and that "you take this massive monthly expense and create a benefit that will help you build your credit score without going into debt." In a partnership with Project Green, Dwelling Place is launching a rent reporting initiative for residents to pass along the benefits and savings associated with having a higher credit score.

Through its partnership with Project GREEN, Dwelling Place was introduced to Esusu Financial Inc, a technology company specializing in rent reporting. Founded by immigrants Abbey Wemimo and Samir Goel, Esusu was quick to notice that a person's credit score was crucial to financial success and that over 45 million households in the United States are currently "unscorable." Esusu can turn existing rent payments into a positive tradeline on a person's credit report by verifying the rent payment with housing providers and then transmitting that data to the three major credit bureaus: Transunion, Equifax, and Experian.

"We have been finding that most renters will see an immediate increase of their credit score of about 20 points, and as those on-time rental payments continue, it could lead to an increase of 45+ points," explains Dallas Lenear. In one case study, Esusu found that rent reporting increased the average resident credit score by 90+ points and that 100% of previously “unscorable” renters became scorable. "Having a good credit score will save the average household an average of over $130,000 over one’s adult life," says Lenear. "If you are a low-income household, the savings alone are important enough to be engaged [with your credit score]."

As rent reporting has started to gain traction amongst renters and housing providers, regulators have noticed. In a press release, New Freddie Mac Initiative Helps Renters Build Credit, Freddie Mac, a government-sponsored mortgage corporation, explains that "less than 10% of renters see their on-time rental payment history reflected in their credit scores, inhibiting their ability to access credit or obtain competitive rates for a range of financial products."

In the press release, Michael DeVito, CEO of Freddie Mac, added that, "Rent payments are often the single largest monthly line item in a family's budget but paying your rent on time does not show up in a credit report like a mortgage payment," and "That puts the forty-four million households who rent at a significant disadvantage when they seek financing for a home, a car or even an education. While there remains more to do, this is a meaningful step in addressing this age-old problem."

Many renters have limited options for building and establishing their credit scores. Traditionally, households need to take on debt and pay those debts to build credit. Still, many of those products, such as credit cards or auto loans, are often unavailable to low credit or “unscorable” households leaving only more predatory options such as payday lending available.

Ultimately, rent reporting is built on a model of viewing credit as an asset. "When you think about credit, you don't need to only focus on the debt aspect of it, but rather, how having a good credit score plays an important role in achieving your financial goals," says Lenear. "It's empowering because it shows renters that they do have some power and equipping them to use that power to make change is the goal here."

Dwelling Place takes an active role in empowering residents to find long-term stability and self-sufficiency by offering various financial empowerment programs such as 1-1 Financial Coaching with support from United Bank, offering a free financial management course through 1428 Financial Wellness, and by offering Rent Reporting for Credit Building thanks to funding from Project GREEN and the Credit Builders Alliance. Rent Reporting for Credit Building will be available to residents at the following Grand Rapids properties: Biermeister Apts, Martineau Apts, Chaffee Apts, Lenox Apts, Kelsey Apts, Goodwich Apts, Peterlien Apts, Grandville Homes, and New Hope Homes. For questions, please reach out to Dwelling Place’s Personal Asset Building Specialist, Mitchell Sevigny at [email protected].

With a mission to improve the lives of people by creating quality affordable housing, providing essential support services and serving as a catalyst for neighborhood revitalization, Dwelling Place serves families and people in 4 counties across West Michigan. Dwelling Place is powered by volunteers and numerous staff persons, guest writers create our Rapidian content. Thanks to Americorps member and Dwelling Place’s Personal Asset Building Specialist Mitchell Sevigny for writing this piece!