Why Rent Reporting Alone Is Not Enough to Build Consumer Credit

Ma-Keba Frye  |  June 11, 2020   |  Credit & Lending  

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Rent reporting has been around for several years, and consumers with thin or no credit files are reaping the benefits. Rental payments make up approximately 30 percent of consumer incomes, which provides deeper visibility into consumer spend. While defaulting on rent payments can damage consumer credit, on-time rent payments often go unnoticed. Rent reporting gives credit files a needed boost, but that alone isn’t enough to build consumer credit files.

Rental payments make up approximately 30% of consumer incomes, which provides deeper visibility into consumer spend.

The COVID-19 pandemic has exposed the vulnerabilities of traditional risk assessment, opening the door for alternative data sources to supplement new inconsistencies in credit reporting. Many consumers can expect to see negative remarks on their credit reports as delinquencies rise unless lenders get more context into payment behavior. Incorporating additional payment histories, like utility and telecom payments, into consumer credit can identify more creditworthy consumers in their time of need. 

Rent reporting + utility payment reporting

Incorporating other alternative data sources into credit reporting can be beneficial for both consumers and credit building companies. Utility payments account for an additional 10 percent of consumer spend. With roughly 91.5 million consumers having thin or no credit files, utility payment data can positively impact the credit scores of many by reporting on-time payments to the credit bureaus. 

The credit reporting system has gone relatively unchanged for years. Yet most consumers have utility and telecom accounts that can expand their credit histories. With the addition of alternative data, the underbanked population can step out of the shadows and build consumer credit. Post-COVID and thin credit files can also be enhanced when a utility account appears on the credit report as an open tradeline. 

Post-COVID and thin credit files can be enhanced when a utility account appears on the credit report as an open tradeline. 

Build consumer credit for near-prime consumers 

Consumers with thin or no credit files aren’t the only ones who benefit from utility or rent reporting. Near-prime consumers can also improve their credit status by incorporating a positive payment history. According to Equifax, 5.5 million U.S. consumers can potentially move from unscorable or subprime credit scores to prime or near prime when lenders incorporate telecom, utility, and other non-traditional payment histories. 

Companies that are reporting rental payments today should take a closer look at utility payment reporting. It provides an opportunity to grow your business and improve the retention of your current customers. LevelCredit has taken advantage of this opportunity, now reporting both rent and utility payments to help customers maximize their credit status without adding debt. 

 

READ ABOUT THE IMPACT OF REPORTING EVERYDAY EXPENSES ON CREDIT SCORES

 

Expand your offering with utility payment data

Rent reporting goes hand in hand with utility payment reporting when it comes to building consumer credit. By offering both, rent reporters can enhance their product and service offerings and expand their business. Urjanet’s automation and simple implementation make it easy to incorporate expenses from electric, natural gas, water, telecom, and cable providers.

To learn how Urjanet can improve your services and help you stay competitive, speak to one of our data experts today.

 

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About Ma-Keba Frye

Ma-Keba Frye is a Content Marketing Associate at Urjanet, assisting with content development and execution. When she's not writing, she enjoys reading, listening to music, and volunteering.


Tags   Alternative Data   |   Credit   |   Lending   |   Risk Assessment   |   Urjanet   |   Utility Data   |