Rent reporting expands as more influential players advance the cause

Efforts to use rental payment records to build or improve credit histories gained some additional momentum on Wednesday.

Experian, one of the "Big 3" credit bureaus, began testing a feed of rent data into FICO Score 8. Also Berkadia — a top multifamily lender — announced a new multiyear agreement with Esusu, a high-profile fintech that is working with government-sponsored enterprise Freddie Mac to report on-time rental payments to Equifax, Transunion, and Experian.

The two initiatives could help to make more consumers who lack a traditional credit history eligible for loans. The Experian test may also provide another reason for the GSEs to use more advanced scores in their underwriting systems.

Fannie Mae has been considering positive rent data in loan decisions since last year, and Freddie Mac followed suit in July, but both generally use the classic FICO score in routine underwriting. However, both have been rumored to be moving toward adopting VantageScore, according to a Compass Point note that none of the three entities involved have confirmed. If it's true, the GSEs also would likely have evaluated other advanced scores like FICO 8.

Experian launched the beta test Wednesday via its Boost product, through which it has allowed consumers to submit other types of nontraditional payment data — such as utilities, telecom or streaming — with the aim of increasing their scores.

Nearly two-thirds of those who submit positive rent data through the beta test could get higher credit scores, according to Experian. The bureau expects to see an average gain of nearly 10 points for those new to Boost, or 14 points for those with low scores or thin credit files. Combined with other types of nontraditional payment data, the increase could be roughly 19 points.

Experian processes rent data through an in-house unit that is partnered with a growing group of more than 1,500 U.S.-based property management companies and several payment platforms like AppFolio, Buildium, Yardi Breeze and Zillow Rental Manager. Consumers also can choose to allow access to bank information to verify rental payments.

Separately, Berkadia's partnership with Esusu — a fintech that's gotten some buzz not only because of its ties to Freddie Mac, but because tennis star Serena Williams has invested in it — will further add to available rent reporting. Berkadia was the largest multifamily lender working with Freddie Mac in 2021, and the third largest doing business with Fannie Mae.

Esusu has been reporting into all three credit bureaus since Spring of 2021, according to a press release it issued with Berkadia Wednesday to announce the new multi-year contract. Specific terms of the deal were not disclosed.

"This will help owners and operators reach their own [environmental, social and governance] goals at an exceptional value and support Esusu's critical and innovative objective — helping renters build and improve their credit," said Bryce Nyberg, director of Berkadia Digital, in the press release.

Rent reporting has been in development for some time but it's gotten fresh momentum from the Biden administration's efforts to improve access to affordable housing and close the homeownership gap between racial groups, which is widest between white and Black borrowers. The GSEs have included rent reporting in their plans to address that gap. They note that the lack of a traditional credit history is among the homeownership challenges Black borrowers commonly face due to systemic inequities.

Some experts have warned that rent reporting could have a downside for consumers if it has a negative impact that shuts them out of homeownership. In the case of Experian's and Esusu's initiatives, only positive rent payment histories are included in credit reporting.