Rent Reporting for Credit Building for Public Housing Authorities

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Rent Reporting for Credit Building

for Public Housing Authorities

Presented by HUD, Credit Builders Alliance, and the

Corporation for Enterprise Development

(2)

Introduction

Sandy Norcom

, U.S. Department of

(3)

Introduction (HUD)

Why is Credit Building important and what exactly is it?

How does Rent Reporting fit in? (CBA)

Who are CBA and CFED? (CBA & CFED)

Why Rent Reporting? (CFED)

Power of Rent Reporting Pilot results (CBA)

Future research & key implementation considerations

(CFED & CBA)

Implementing Rent Reporting for Credit Building (CBA)

Q&A

(4)

Why Credit Building?

• Increases Cash Flow and Creates Opportunities to

Save

• Improves Employment Outcomes

• Increases Housing Options

• Improves Access to High-Quality Credit Products

• Expands Opportunities for Small Business Growth

(5)

What is Credit Building?

Definitions

CREDIT REPAIR:

Reducing current debt and

paying off historical accounts in collections.

CREDIT BUILDING:

The act of making

on-time monthly payments on a financial

product such as an installment loan or a

credit card that is reported by the creditor

to the major credit bureaus

.

78

0

513

657

824

456 GOOD

CREDIT

Credit Repair = Focus on fixing past

(6)

What is Credit Building?

How it Works

Opening and successfully

managing financial products is key

to

building

and

maintaining

a

(7)

Rent Reporting: A NEW

CB Strategy

Rent reporting:

The establishment of a rental trade line

and regular monthly reporting of rental payments to at

least one of the major consumer credit bureaus for

inclusion on traditional consumer credit reports.

Rent reporting for credit building:

The pairing of rent

reporting with financial/credit coaching or other financial

capability programming with the aim of supporting

residents to recognize and leverage rent reporting as a

credit building opportunity.

(8)

Every on-time monthly payment reinforces

positive financial habits!

Rent Reporting for Credit Building

(9)

To create innovative solutions for asset building

organizations helping low- and modest income

households build credit and financial access.

Good Credit is an Asset

Mission driven nonprofits and other entities are uniquely

positioned to help the households they serve build credit

as an asset

– often the FOUNDATIONAL asset.

Introduction:

(10)

Introduction:

(11)

Credit

Builder

Community

Members

Network &

Increase

Visibility

(Credit Building

Community

Report & Pull

Reports

(Credit Building

Platform)

Innovate &

Engage with

Field

(Credit Building

Hot Topics)

Build Capacity

& Enhance

Programming

(Credit Building

Toolkit)

CBA members share

with and learn from

each other

Connect to the

credit bureaus

through our

one-of-a-kind umbrella

arrangements

Updates on relevant innovations,

products, services, activity, and best

practices in the field

Provide valuable

technical

assistance,

training, and

consulting

Introduction:

CBA’s One-Stop-Shop

(12)

facebook.com/CFEDNews @CFEDNews

cfed.org/blog/inclusiveeconomy

www.cfed.org

About CFED

CFED

(Corporation for Enterprise

Development) empowers

individuals and families to build

and preserve assets by advancing

policies and strategies that help

them go to college, buy a home,

start a business, and save for now

and for the future.

Identify Good Ideas

: CFED’s research

finds ideas with potential for making the

economy work for everyone, particularly

those on the margins.

Develop partnerships:

CFED works in

partnership with diverse organizations

across the country to promote lasting

change.

Bring Them to Scale

: CFED brings

together community practice, public

policy and private markets to achieve

the greatest economic impact.

We combine the vision of a think

tank with real-world experience to:

(13)

facebook.com/CFEDNews @CFEDNews

cfed.org/blog/inclusiveeconomy

www.cfed.org

PROTECT

gains made through insurance & avoiding predatory practices

SAVE

for

emergencies &

future

INVEST

in assets

to generate wealth,

income

EARN

income &

public benefits

LEARN

financial skills & build human capital

Household Financial Security Framework

Assets can increase income and earning capacity

(14)

Problem:

Unlike homeowners, renters do not build credit by making their monthly

housing payments.

Solution:

Reporting rental payments offers low-income renters an opportunity to

build credit as a financial asset: Mission-driven affordable housing

organizations are poised to help them do so.

Goal:

To catalyze rent reporting as a valuable and

viable option for low-income renters to build

credit and financial capability.

The Power of Rent

Reporting Pilot

(15)

CBA’s Power of Rent Reporting Pilot

(16)

Pilot Overview

EPIC Property Management

East Bay Asian Local

Development

Corporation

Covenant

Community

Capital

Marquette

Management

Cleveland Housing

Network

AHC

Greater

Baltimore

Affordable Housing,

Education and Development

Commonwealth

Land Trust

(17)

Experian

RentBureau

®

:

How Rent

Reporting

Works

(18)

Affordable housing owners or operators who benefit

from federal assistance are subject to the Privacy

Act of 1974, which places certain safeguards on the

sharing of residents’ personally identifiable

information with a third party, including a credit

bureau.

Any property owner or operator subject to the

Privacy Act and wishing to report rental payment

data to the credit bureaus must obtain a resident’s

opt-in — i.e., prior written consent — to do so.

(19)

Pilot Results Summary

Renters see rent reporting as a good opportunity for

credit building

Rent reporting offers a significant credit building

opportunity to affordable housing renters

Rent reporting is a promising strategy for AHPs seeking

to increase resident participation and success in

financial coaching and asset building programs

Rent reporting in combination with financial coaching

can incentivize residents to increase their rates of

(20)

Pilot Results:

Renter Interest

38%

have reviewed their credit report in the past

12 months

96%

reported that having good credit is important

to them

97%

reported that paying rent on time is a

good way for them to build their credit

(21)

100%

of residents with no trades transitioned to the

thin-file category and are now

SCOREABLE

by VantageScore 3.0.

Risk

Segment

Percentage of

Unscoreable

Population

Average

VantageScore

3.0 before

Average

VantageScore

3.0 after

Prime

72%

N/A

688 Nonprime

28%

N/A

646 Subprime

0%

N/A

Total

100%

N/A

676 Pilot Results:

(22)

79%

14%

_7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Increase

No Change

Decrease

Change in Participant Credit Score

79% =

avg. increase

23 points

Pilot Results:

(23)

3%

55%

19%

24%

0%

47%

26%

27%

0%

10%

20%

30%

40%

50%

60%

Uscoreable

(Highest Risk)

Subprime

Nonprime

Prime

(Lowest Risk)

P

e

rc

e

n

ta

ge

o

f

P

ar

ti

ci

p

an

ts

Credit Score Tier

Change in Participant Score Tiers with the Inclusion

of Rental Data

Without rental trade line

With rental trade line

Pilot Results:

(24)

79%

45

11

16

54 ₄₂

36

138 ₁₃₁

489

0

100

200

300

400

500

600 Prime

Nonprime

Subprime

Participant Credit Score Change by

Baseline Score Tier

# with score decrease

# with no score change

# with score increase

90%

= avg.

increase

32 points

71%

58%

Pilot Results:

(25)

• Clearly connect rent reporting with relevant and specific credit building

goals.

• Incorporating rent reporting enrollment into a regular resident interaction

is an efficient and effective strategy for getting high rates of resident

participation.

• Connecting the rent reporting for credit building opportunity with existing

financial coaching and asset building programming gives affordable

housing providers an additional hook to increase resident engagement and

successful participation.

• Integrating rent reporting for credit building into financial coaching and

asset building programming empowers and supports residents to translate

their credit improvements into real progress toward their broader financial

goals, such as budgeting, saving, and building assets.

Pilot Results:

(26)

67%

54%

53%

33%

68%

26%

57%

34%

% who decreased

% who decreased by at least 25%

P

e

rc

e

n

ta

ge

o

f

re

n

te

rs

w

h

o

r

e

gu

la

rl

y

p

ay

l

at

e

Change in rate of late payment

Change in Payment for Regularly Late Renters

(initial late payment rate of at least 40%)

Opted In

Opt-In Eligible

Opt-Out

Nonparticipant

Pilot Results:

(27)

Learn more at:

http://creditbuildersalliance.org/whats-new/hot-topics/power-rent-reporting-cbas-pilot

(28)

Future Opportunities

& Research

• More behaviorally-informed research on increasing resident opt-in.

• More evaluation of rent reporting’s impact on residents’ credit

profiles and scores.

• More research on effective strategies for helping residents translate

credit improvements into actual savings, new opportunities, and

assets, and for leveraging rent reporting as a positive incentive for

on-time rent payment.

• Productive dialogue within the credit industry regarding the

standardization of rent reporting policies and procedures to ensure

they accommodate the specific needs of affordable housing

(29)

Key Implementation

Considerations

• Funding for preliminary organizational/

option assessment and program

implementation

• Internal buy-in and prioritization

• Technological and programmatic

readiness and capacity building

commitment

(30)

CBA Rent

Reporting for

Credit

Building 101

®

Overview

(31)

Rent Reporting for Credit Building

Options for PHAs

1. Assess organizational interest and capacity

2. Connect directly with the credit bureaus (may

consider working with payment processing

companies) to report

3. Design and integrate a more comprehensive Rent

Reporting for Credit Building initiative into

programming, including ideally a plan for outcome

tracking & evaluation

(32)

Questions

Q&A

(33)

PHA Invite

Interested in working with HUD on a

rent payment study?

Pamela Lee

Pamela.P.Lee@hud.gov

Todd Richardson

(34)

Thank You!

Please be in touch

Sandy Norcom

sandra.norcom@hud.gov

Sarah Chenven & Carolyn Schulte

programs@creditbuildersalliance.org

Doug Ryan