Every month more than 1 in 3 households in the United States will pay rent. But, unlike homeowners, when renters make on-time payments, it likely doesn’t help them build credit.
This is one of the ways renters — a majority of whom are nonwhite and have lower incomes — are treated differently in our economy.
“Renters don’t typically get credit for on-time rent payments, though they can be penalized for late or missed payments,” said Richard Reeve, chief program officer at Credit Builders Alliance.
“A lack of credit or bad credit can really cost you, since you end up paying more for the same sorts of services than a person with good credit would. Poor credit costs low-income people an average of $200,000 over their lifetime. That’s higher than the racial wealth gap between Black and white households.”
Rent reporting addresses this inequity head-on.
Narrowing wealth and health gaps
According to Asset Funders Network, more than 73 million Americans pay more for loans because of their credit scores. Lower credit scores — or not having a credit score at all — can make it harder to build wealth that can be passed on to future generations. This is especially true for communities of color, which have been historically and persistently discriminated against by the financial system.
Reporting on-time rent payments to credit bureaus, also known as rent reporting, could:
Help renters realize the benefits of better credit, including qualifying for loans that can help them buy a home, pay for school, or even start a business
Increase on-time rent payments and improve relationships between renters and landlords
Broaden opportunities for employment and small-business ownership for renters
The downstream effects of rent reporting can help reverse the widening wealth gap in the United States, which could in turn have a profound effect on health. Wealth provides people and families greater access to factors that promote good health, like safe and stable housing, healthy food, and reduced stress.
“Health is strongly affected by both wealth and income,” said Stephanie Ledesma, vice president of community health programs for Kaiser Permanente. “Everyone should have access to safe and fair financial products and services to help them save what they can, borrow when they need to, and build wealth for the long term.”
Breaking cycles of poverty
Kaiser Permanente is working with Credit Builders Alliance — an organization committed to closing gaps that lock millions of individuals with lower, invisible, or no credit out of the mainstream financial system — to increase access to rent reporting services.
In 2020, Credit Builders Alliance introduced a rent reporting program through the District of Columbia Housing Authority. Among the residents participating in rent reporting, 75% have seen an improvement in their credit score by an average of 29 points, 4 were able to establish a credit score for the first time, and at least 1 was able to realize her dream of homeownership.
As part of our efforts to strengthen equitable economic opportunity, over the next 2 years Kaiser Permanente will provide $450,000 in grant funding and technical assistance to help 60 to 80 organizations offer robust rent reporting and other credit-building programs to Americans with low incomes.
One of those organizations is Neighbor to Neighbor, based in Colorado. Our grant will help Neighbor to Neighbor cover rent reporting fees and help renters manage their finances.
“We’re really interested in breaking cycles of intergenerational poverty, which are so often tied to credit, access to owning a home, and financial literacy,” said Christy Hayes, director of community operations at Neighbor to Neighbor. “For less than $2 a month per person, our residents will have access to rent reporting, including credit building and financial education. It’s a small investment with so much potential.”