Housing is the\u00a0most considerable expense for U.S. consumers\u00a0\u2014 and while high rents and home prices are obstacles to saving for potential homebuyers,\u00a0access to affordable credit\u00a0is another significant roadblock.\u00a0<\/p>\n
An estimated 50 million Americans are \u201ccredit invisible,\u201d according to\u00a0a 2022 fact sheet\u00a0from the Office of the Comptroller of the Currency\u2019s Project REACh, or Roundtable for Economic Access and Change. That means they don\u2019t have a credit file and lack a credit score and, as a result, find it challenging to qualify for a mortgage, credit card or other financing.<\/p>\n
\u2033\u2018Credit invisible\u2019 is someone who hasn\u2019t interacted with the credit system. They either have no credit file or a thin credit file,\u201d said Priscilla Almodovar, the CEO of the housing financing agency Fannie Mae. \u201cSo that impacts people who want to buy a home, and that could be people new to this country; it could be Black, Latinos and young people, the millennials, driving this housing demand.\u201d<\/p>\n
Still, consumers with thin credit files may have a history of paying rent on time \u2014 a factor mortgage financing provider Fannie Mae started to count in late 2022. Its\u00a0Positive Rent Payment Reporting initiative, which has been extended through the end of 2024, allows people renting in eligible properties to\u00a0have their rent payments counted\u00a0by credit rating agencies at no cost.\u00a0<\/p>\n
\u201cWe\u2019re now able to level the playing field and make access to credit something that\u2019s available to many more consumers,\u201d Almodovar said.\u00a0<\/p>\n
Having little or no credit is a major stumbling block to getting a mortgage. It also prevents consumers from getting attractive rates on all types of loans.<\/p>\n
Rent payments can be one way to gain credit visibility.<\/p>\n
Fannie Mae\u2019s free program works with providers Esusu Financial Inc., Jetty Credit and Rent Dynamics. There are many other players in the market, too.\u00a0Experian Boost\u00a0reports rent payments for free as well as payments for utilities, mobile phones and streaming services. Other\u00a0rent-reporting firms\u00a0\u2014 including\u00a0Boom,\u00a0Rental Kharma,\u00a0RentReporters\u00a0and\u00a0Self\u00a0\u2014 also can provide your rental payments to one or more major credit bureaus for free or a modest fee by allowing access to your bank statements.\u00a0<\/p>\n
When rent payments are included in credit reports, consumers see an average increase of nearly 60 points to their credit score, according to a\u00a02021 TransUnion report.<\/p>\n
Fannie Mae\u2019s pilot program has helped more than 35,000 people establish credit scores, the agency reports. Participants who already had a credit score and saw an improvement\u00a0had an average score increase\u00a0of up to 40 points, according to Fannie Mae.<\/p>\n
Florida resident Joe Grande, 56, who works as an inventory control clerk, saw a credit boost of 80 points in his first three months, to 660, after signing up for free reporting from his landlord through rent reporting company Esusu, a vendor that works with Fannie Mae. He says the program has helped keep him on track toward his goal of buying a home.<\/p>\n
\u201cIt makes me feel like I\u2019m in control, but it also makes me want to make sure everything else is paid on time,\u201d Grande said.\u00a0<\/p>\n
Experts say the impact on your credit can be significant. \u201cWhat it accomplishes for you, adding 24 on-time payments, it\u2019s like jumpstarting your car with a truck battery,\u201d said Martin Lynch, president of the Financial Counseling Association of America and education director at the non-profit Cambridge Credit Counseling in Agawam, Massachusetts.\u00a0<\/p>\n
While these programs can help build credit more quickly, experts caution that it takes time to establish a track record.<\/p>\n
It typically takes six months to create a credit profile and longer to establish a solid track record of repayment, experts say.\u00a0Credit scores\u00a0generally range from 300 to 850 \u2014 and lenders generally view a credit score lower than 670 as a higher risk.\u00a0\u00a0<\/p>\n
\u201cFor somebody with a 680, they\u2019re going to be able to obtain financing, but it\u2019s typically not going to give them access to the lowest interest rates and the best deals,\u201d said Bruce McClary, a senior vice president at the National Foundation for Credit Counseling.\u00a0<\/p>\n
It\u2019s also important to carefully review the costs and terms of the rent-reporting company you want to use. While the Fannie Mae pilot provides only positive payment history to all three credit bureaus at no cost, consumers using rent reporting outside of that should clarify if there information is being reported to all three of the biggest players: Equifax, Experian and TransUnion.<\/p>\n
\u201cIf your good payment history is being reporting to one of the three, that can be less impactful than if reported to all three credit bureaus,\u201d said Matt Schulz, chief credit analyst at LendingTree.<\/p>\n<\/p>\n
Housing is the\u00a0most considerable expense for U.S. consumers\u00a0\u2014 and while high rents and home prices are obstacles to saving for potential homebuyers,\u00a0access to affordable credit\u00a0is another significant roadblock.\u00a0 An estimated 50 million Americans are \u201ccredit invisible,\u201d according to\u00a0a 2022 fact sheet\u00a0from the Office of the Comptroller of the Currency\u2019s Project REACh, or Roundtable for Economic […]<\/p>\n","protected":false},"author":0,"featured_media":6324,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-6323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/6323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=6323"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/6323\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/6324"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=6323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=6323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=6323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}