Property Owners Look to Tech to Help Them Report Rents to Credit Agencies
So much of our current economic system is based off of credit scores. These scores are given by rating agencies to reflect a person’s ability to pay off a debt. They affect everything from interest rates for credit cards to mortgage qualification.
The inability of many lower-income people to establish credit is a major concern right now for many politicians as it is seen as exacerbating the wealth gap. They have identified rent payments, an expense that almost every low-income person pays regularly, as a possible way to help establish credit.
Some places are already starting to require certain landlords to report rental history to credit agencies. California has passed legislation requiring landlords of subsidized housing to offer tenants low-cost credit reporting for rent payments. There are also plans to make reporting a national requirement.
A Senator from Georgia, Jon Ossof, has introduced the Access to Homeownership Act that would require any multifamily landlord that receives financing through Federal agencies like Fannie Mae or Freddie Mac to offer tenants the ability to have their on-time rental payments reported to credit bureaus.
Helping people build credit with their rental payments sounds like a no brainer, but a survey done by the Department of Housing and Urban Development shows that barriers still exist. They found that, even though this kind of reporting by the landlord would help improve credit scores, renters did not always trust the program.
“One common refrain was how difficult it was to overcome residents’ distrust of the initiative and communicate the tangible benefits of rent reporting,” the researchers wrote in their findings.
Tenants’ unwillingness to participate and a lack of guidance for landlords have pushed many to use software to implement rent reporting programs. “Although some landlords initially considered reporting directly to credit bureaus, each ultimately chose third-party software vendors to assist with implementation,” the HUD report explained.
“The third-party vendors played a critical role in the early implementation stage by training staff members and offering modules that could integrate rent reporting into the landlords’ existing property management systems and automate some administrative duties.”
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The rise of rent reporting laws and landlords’ desire to outsource this task has led to a proliferation of technology to meet the new requirement. Companies like Self Rent Reporting, Boom Pay, and Rental Kharma offer various services to help landlords and tenants report rent payments to credit agencies.
One company, Bilt Rewards, has taken the service even further. It allows tenants to earn rewards for on-time rent payments and pays landlords when residents spend their rewards at participating retailers and restaurants. Bilt Rewards has grown quickly, processing around $30 billion in payments annually. The company has raised over $500 million in funding and is now valued at $3.25 billion.
With only around 5 percent of landlords currently reporting to credit bureaus, more companies are likely to provide these types of solutions. Even large property management software companies like RealPage and Yardi are offering credit reporting options.
However, with the proliferation of these services, those who find creative ways to deliver value and overcome obstacles like tenant pushback will be the ones to capture the market in this growing segment of the real estate industry.
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Source: Propmodo
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