Rent Reporting Pilot Results Webinar FAQ

The Power of Rent Reporting Pilot Results Webinar
Questions and Answers
March 25, 2015
Credit Bureau Reach
Is Experian the only major credit bureau reporting rental data on its traditional consumer credit reports?
No. TransUnion is also currently reporting rental payment information on its traditional consumer credit
reports and we are hopeful, but cannot confirm, that Equifax will do so as well in the future. CBA is
committed to working with all three credit bureaus to make rent reporting an effective and effective
credit building tool for affordable housing providers and their residents.
Costs
Do the credit bureaus charge data furnishers (property managers or payment processors) to report
rental data? What other hard costs may be involved?
Experian RentBureau and TransUnion do not charge rental data furnishers any fees in order to report
rental payment data. Both bureaus typically charge a small fee for the site visit required as part of the
application and credentialing process and there may be a fee associated with monitoring disputes
through the e-OSCAR system.
Some software property management companies may charge their clients a fee in order to allow an
integration to be built between the property manager’s database and a credit bureau.
Most third party payment processors that are credentialed to report rental payments to one or more
major credit bureau do charge for the payment processing service they provide. Some of these payment
processors allow the property management company or landlord to decide whether the cost of the
service will be paid by the landlord or paid directly by the renter.
Cost/Benefit Analysis of Rent Reporting for Property Management Companies/Landlords
Is there some kind of incentive or movement to get property managers or private homeowners
credentialed to report rent payments to the credit bureaus?
Some credit bureaus require a property manager/landlord to manage a minimum number of rental units
in order to become a credentialed rental data furnisher. Partnering with a credentialed third party
payment processor may be a good option for small property managers or individual landlords who
would like to have their residents’ rental payments reported but may not meet the unit minimum or
may not have the internal capacity required to be a responsible rent reporter.
Over the course of our pilot, we learned that different property management companies are
incentivized to report rental payments in different ways. Some property management teams and
companies were motivated to report because of the credit building opportunity it provides to residents.
Other property management companies were motivated to report because they saw rent reporting as a
tool to incentivize on-time rent payment and improve rent collection. Some third party property
management companies were motivated to report due to pressure from the property owners.
What about the potential for rent reporting outside of affordable housing providers - what is the
landscape for private rental companies in terms of being incentivized to do rent reporting?
The VAST majority of the 13 million renters whose rental payment data is being furnished to Experian
RentBureau is coming from private property management companies. Some cite the ability to report
positive data to the traditional consumer credit files as a competitive advantage.
What is the process for those renting from an individual homeowner not managed through an agency?
Payment processing (and/or other independent third party companies) that the renter can self-enroll
with offer an alternative. CBA does not endorse any particular company but you may consider
evaluating ClearNow, RentTrack, Rental Kharma, and/or Rezzcard may be options.
How will rental management companies be impacted with respect to the Fair Credit Reporting Act? Will
the landlords have to respond to erroneous data reported?
Property management companies that are credentialed by one or more of the major credit bureaus to
directly report rental payment data are responsible for reporting data with accuracy and integrity in
accordance with FCRA guidelines. Property managers that are directly furnishing data are also
responsible for monitoring, investigating and responding to consumer disputes. While they don’t offer
legal advice, the bureaus offer guidance and have developed some mechanisms to help rental data
furnishers comply with their FCRA obligations. (Over the course of our pilot, none of the pilot
organizations received a single dispute.)
Experian RentBureau’s Reporting Policies
Why are only the on-time payments reported to the traditional consumer credit databases? How does
this reporting work with mortgage payments?
Experian RentBureau reports only ‘paid as agreed’ rental payments on Experian traditional consumer
credit reports (other credit bureaus have different policies). As a totally separate organization, CBA
cannot comment on why Experian RentBureau or any other bureaus’ policies are what they are.
Typically, mortgages are reported to the credit bureaus in a full-file fashion (both on-time, late, and
missed payments).
How are the non-current months handled on the trade line? If only positive rent payment information is
reported - what happens in a scenario where someone makes several on time payments and then misses
a few months?
If only positive rent payment information is reported - what happens in a scenario where someone makes
several on time payments and then misses a few months ... then gets back on track. How are the noncurrent months handled on the trade line? Seems like no info reporting for a few months would reflect a
negative gap ?
When a property manager or payment processor reports to Experian RentBureau (ERB) that a resident
did not pay as agreed, ERB does not load that information into Experian’s traditional consumer credit
database and it does not go onto their credit report. When a rental payment is reported as ‘paid as
agreed’ it will be indicated by a “1” on the credit report. When a rental payment is reported as anything
other than ‘paid as agreed’, that information will not be uploaded to Experian and the individual would
see a “-” for that month on their rental trade line on their credit report indicating that there was no
information reported for that trade line that month.
If a renter is late or does not pay rent for three consecutive months, ERB will delete the entire rental
trade line from the individual’s consumer credit report and it will be as if the data were never reported.
If the renter gets back on track within that three month period his or her trade line will reflect at “1” and
reporting will continue.
Are the payments reported monthly? How long does it take to have this trade line posted on the
traditional Experian report?
Credentialed property managers and payment processors report rental payment data to Experian
RentBureau at least once per month, and possibly daily, depending on the data integration that is set
up. Experian RentBureau then uploads that rental payment information into Experian’s consumer credit
reporting database once per month (towards the end of each month). Once a credentialed data
furnisher beings reporting live data to Experian RentBureau, residents having their payments reported
should see a new rental trade line on their credit report within a month.
If a resident gets behind on their rent and makes a payment arrangement with the property manager,
how would it show on their credit report?
During the rent reporting technical setup process, the bureau and the property management company
work together to make sure the bureau is correctly interpreting the data according to each property
management company’s business rules. The bureau should therefore be able to recognize a payment
arrangement and whether a resident has ‘paid as agreed’ in line with that payment arrangement.
Since late payments are reported to Experian RentBureau, while only positive information is reported to
the Experian traditional consumer credit database, couldn't late payment information adversely impact a
resident's prospects in terms of finding a new rental unit if landlords use Experian RentBureau to screen
applicants?
Yes. Although late and missed rental payments are not reported on an individual’s consumer credit
report, those late and missed rental payments reported by their property manager to Experian
RentBureau are included in Experian RentBureau’s tenant screening database which may be used by
landlords and property managers for tenant screening purposes. Reporting rental payment information
to Experian RentBureau can potentially adversely impact a resident’s prospects in terms of finding new
rental housing.
Payment Processors
What payment processor went out of business? Why did they go out of business?
WilliamPaid, an online payment processing company credentialed to report to Experian RentBureau
went out of business in March 2015. Two of our pilot groups had been partnering with WilliamPaid to
process and report their residents’ rental payments. We do not have all the details as to why
WilliamPaid went out of business but believe that as more companies emerged in the rental payment
processing and reporting space, competition increased and ultimately WilliamPaid was not able to
successfully compete.
Analyzing the Impact of Rent Reporting on Affordable Housing Resident Credit Scores
What is the reason for using VantageScore 3.0 vs. any other scoring system for the analysis?
There are a few reasons VantageScore 3.0 was used in this analysis. Firstly, VantageScore 3.0 is relevant
– although it is not the most widely used score by lenders, it is used by 6 of the 10 largest banks.
Secondly, it operates on the 300-850 range which is familiar to consumers and lenders. Thirdly,
VantageScore 3.0 intentionally incorporates rental data into its scoring model. Lastly, VantageScore 3.0
was jointly created by the three major credit bureaus and therefore they have greater control over the
model.
How many months were rents reported in the pilot?
Our pilot organizations began reporting rental payments at different times depending on how quickly
they were able to successfully get through the setup process and collect residents’ written consent (if
required). Our first pilot organization began reporting in the fall of 2013 and our last pilot organizations
began reporting in the fall of 2014. However, Experian RentBureau (ERB) allows credentialed property
management companies to report historical rental payment information and all of our pilot groups did
just that. So, regardless of when the pilot organization began reporting to ERB, their residents got the
benefit of up to the past 24 months of timely rent payments reported on their rental trade line on their
consumer credit report. The credit score analysis included all participating residents regardless of the
length of their rental payment history. Those with thinner files and longer rental payment histories
reported experienced greater score benefits.
Were you able to track by age demographic and if so, did you find that seniors were interested in
participating?
In the credit impact analysis, we were not able to track credit score impact by age or demographic.
Anecdotally, both AHEAD and AHC Greater Baltimore piloted rent reporting with some senior residents
and after initial disinterest and pushback, they both had successes in enrolling seniors to have their
rental payments reported. Each reported specific success stories associated with being able to help
seniors see a direct benefit (while not interested in purchasing a house for example, some were
definitely interested in obtaining a cell phone without a deposit) and others noted that simply
establishing trust made a difference.
Have you had any experience with rent reporting for low income folks not in subsidized housing?
Yes! About half of the individual residents who participated in our pilot live in rental units developed
through Low-Income Housing Tax Credits and do not receive direct subsidies.
Opportunities for Future Involvement with Rent Reporting
Is there an opportunity to participate in the program or was this just a pilot? If there is an opportunity,
how do we go about signing up?
CBA intends to continue supporting affordable housing providers to develop rent reporting for credit
building initiatives through its new consulting service: CBA Rent Reporting for Credit Building. CBA and
our partners at CFED are also seeking funding for a similar pilot that would involve incorporating rent
reporting into Family Self-Sufficiency programs offered by large public housing authorities. If you’re
interested in learning more about the service or potential pilot, take a look at our website or email us at
programs@creditbuildersalliance.org
When do you anticipate scaling the model?
There are still significant issues that need to be resolved in order to scale rent reporting as a credit
building opportunity for affordable housing renters and CBA alone cannot bring rent reporting to scale.
Cooperation and collaboration between and among the credit bureaus, credit scorers, property
management software providers, and property management companies is required in order to make
rent reporting a more efficient and impactful credit building tool for affordable housing providers and
their residents.
Impact of Rent Reporting
What about roommates splitting the rent payment or a couple living together. I assume only one
person's credit can be impacted, but I’m not sure.
Typically, any individual listed on the lease and recognized by the property manager as being responsible
for the rent payment, can have the rental payment reported on their consumer credit report. Each
individual on the lease is responsible for the entire rental payment, not just the portion they contribute
towards the total monthly payment. If more than one person is responsible for that rental payment,
more than one person can have that payment history reported on his or her credit report.
Do we know whether rent reporting impacts the VantageScore, FICO score, or both?
We have confirmed that rental payment data is intentionally incorporated into the new VantageScore
3.0 and FICO 9 credit score models. We have anecdotal information that rental payment data impacts
some older version FICO scores but those models were developed before positive and full file rent
reporting was as common as it is today. In the future, CBA hopes to see lenders and others who use
credit scores for decision making purposes, transition to using these newer scores that are more
inclusive and make better use of the available rental data on consumer credit reports.
Need more explanation from Experian for how reporting on-time rent payments can cause some scores
to go down!!
There are a number of reasons why a score may decrease initially when a positive trade line is added to
a credit report. First, it may increase an individual’s total debt obligation. Second, it may decrease an
individual’s average length of credit history. Finally, credit scores score an individual “compared” to
others that match his or her same type of credit profile. This is confusing, but it may explain why adding
one trade could potentially initially push the score up or down -- because it could cause the individual to
move to a different credit profile scoring segment (by # of trades, balances, etc.) and now be
“compared” against a different population. For example, you can’t “equally” score someone new to
credit with one trade (even if they pay it on time every month) with someone with a long history. They
would be “segmented” into different scoring segments (e.g. if you are now a thick file you are looked at
differently/your score is evaluated differently than before when you were a thin file). Additionally, when
you shift to a new scoring segment the initial drop could be significant but that you are likely to more
quickly build your score back up. So in other words the initial impact could be negative but over time
you can compensate more quickly assuming you continue to pay on time, etc.
Financial Coaching and Asset Building Programming
Is the financial coaching aspect provided by the pilot organizations or an outside agency? Where does
the funding come from to pay for the financial coaching if it is an outside agency?
The financial coaching and asset building programming that was offered to residents along with the rent
reporting opportunity was already in place and being provided by seven of the eight pilot organizations.
These seven pilot organizations had existing funding streams in place to provide these services. For the
one pilot organization that was not already offering financial coaching and asset building support, CBA
identified an experienced and well qualified local agency willing to partner with the pilot organization
and provide on-site financial workshops and one-on-one coaching. CBA provided a small sub-grant to all
pilot organizations in order to cover the time and resources required to develop and implement a rent
reporting program as well as participate in all pilot related activities and complete all required reporting.
CBA and the one pilot organization agreed to use sub-grant funds to contract the third party nonprofit
service provider to offer on-site financial coaching and workshops to residents.
Technicalities of Rent Reporting
Is the reporting system available for Boston Post software?
Currently, there is no standard ‘rent reporting system’ or format. Experian RentBureau prefers rental
data to be transmitted from credentialed property managers via an automated integration with its
property management database but in some special situations will allow for data to be reported
manually. Currently, Experian RentBureau can integrate with many of the most widely used property
management software systems, but not all. Experian RentBureau does not currently integrate with
Boston Post but hopes to in the future.
To our knowledge, TransUnion currently only accepts manually reported data but is working to be able
to offer automated reporting options in the future. If a credentialed property manager’s software
program can produce a report that provides TransUnion (TU) with all of the information it requires, that
property manager can report to TU.
Privacy Act
Are tax credit and rural development properties bound by the Privacy Act opt-in requirement?
CBA does not provide legal advice and encourages any entity/party interested in reporting rental data to
consult with its own legal advisor before making any business decision or determination. Our
understanding, however, is that properties benefitting from federal funds likely subject to Privacy Act
requirements and owners and management agents of housing developments that benefit from federal
assistance will likely be subject to the Privacy Act. While the Privacy Act directly applies to federal
agencies, its requirements have also been extended to federal contractors and grant recipients. To help
determine whether the Privacy Act applies to their activities, housing providers should review any
contracts and grant agreements with federal agencies to determine whether the documents mandate
compliance with the Privacy Act.