How renters are boosting their credit scores and ‘elevating their financial prospects’

Many renters also got a credit score for the first time. Rent payments made by 22,155 previously “credit invisible” tenants formed the basis of a new credit score, according to the data. 

The boost in tenants’ credit scores was a result of government policy enacted last year. In September 2022, Fannie Mae introduced a “Positive Rent Payment” pilot to count on-time rent payments as part of a borrower’s credit report.

Credit scores serve as an indicator of how well a consumer manages their debt, and how likely they are to pay back borrowed money. The score affects whether they can borrow, their interest rate, and how much debt they can take on. A higher credit score can open doors to financial milestones, and can mean more flexibility when renting, or the ability to even buy a home.

See also: It’s National Get Smart About Credit Day. Here are 7 facts you might not know about credit.

For property owners, the Positive Rent Payment pilot was designed to reduce tenant turnover and lower eviction rates. 

In light of the impact the pilot has had on thousands of renters, Fannie Mae on Tuesday announced that it was extending the program through December 2024. Fannie said it would cover the cost for property owners who enroll in the program. According to the government-sponsored enterprise, 80% of renters would like their rent payments to be factored into their credit score.

The Federal Housing Administration has also pushed to include aspiring homeowners’ positive rental payment history on credit reports, as it may boost their eligibility when applying for a FHA loan. In a statement last year, Julia Gordon, Federal Housing Commissioner said that “you’re regularly paying your rent on time, that’s a good indication you will also pay your mortgage on time.” 

Esusu, one of the fintech firms that report on-time rent payments to the credit bureaus, also said that more than 224,000 renters are part of the program.

As of September 2023, more than 100 property owners, 2,170 properties, and 435,000 units had been enrolled in the pilot, according to Fannie Mae.

“In our ongoing pursuit of an equitable society, it is deeply gratifying to witness the significant progress achieved through our partnership with Fannie Mae,” said Wemimo Abbey and Samir Goel, co-founders and co-CEOs of Esusu, in a statement.

“Together, we’ve witnessed more than 22,000 renters establish credit scores,” they added. “This initiative has granted countless renters access to high-quality auto, home, and student loan products, elevating their financial prospects.”