Self Financial Inc. has become approved to submit consumer rent-payment history to all “big 3” credit bureaus, potentially furthering growing efforts to qualify thin-file mortgage applicants with this information.
The fintech firm, which was founded in 2015 and offers a consumer credit-building subscription service, leveraged its recent acquisition of RentTrack in the move. RentTrack receives rental information from property managers and had pre-existing partnerships with TransUnion and Equifax. Those partnerships are now being rounded out by the addition of Experian. Self also is leveraging RentTrack’s consumer division, LevelCredit, to roll out utility bill payment information in addition to rent reporting for customers. Self’s customers typically build credit histories through its online technology application, which encourages savings, and credit card services. Rent and utility payment reporting could give them more options for establishing credit.
For the mortgage industry, the consistent addition of rental payment data to the credit reporting agencies’ consumer files could further efforts by two government-sponsored enterprises to make more borrowers eligible for homeownership. One, Fannie Mae, has begun an effort to incorporate rent payment histories into mortgage underwriting; and the other, Freddie Mac, has been working with Esusu Financial and multifamily borrowers to encourage tenants to self-report this type of information.
Self’s rental data reporting arrangement with the credit bureaus is not exclusive, but it is the only consumer credit-reporting company that works with all three, according to Matt Briggs, executive vice president of strategy. The company at deadline was not doing any direct business with the mortgage industry but it’s been an area of interest given that home purchases have been a driving motivator for its consumer customers’ interest in building credit histories, something using rent or utility data gives them more flexibility to do.
“Providing access to credit is at the heart of what we do, and credit is needed to get a mortgage,” Briggs said in an email. “While we haven’t worked directly in mortgage lending or servicing, we know that aside from building credit, the top financial goal for many of our customers is to own a home. That’s why offering simple, direct-to-consumer rent reporting to the three bureaus is so important to us.”
Consistent reporting has been a challenge in establishing rental payment-based histories that companies like RentTrack, Esusu and others have worked to facilitate. But reporting has been rising. The share of property managers that said they report rent information to the credit bureaus was 27%, according to a TransUnion survey conducted earlier this year. That’s up from 17% in 2019, when the credit bureau last reported this data point.
“It could be beneficial for lenders. A housing payment, whether that’s a mortgage or a rental, is likely the most indicative way to what someone can afford and whether they’ll actually pay on time,” said Vicki Bott, a director leading housing-finance advisory services at consultancy Reference Point, in an interview. Bott previously was executive vice president, regulatory compliance and operational risk at Guaranteed Rate and also held leadership roles at Wells Fargo and the Department of Housing and Urban Development.
However, while the general concept is promising, a lot will depend upon the execution. For it to work, reliable rent data will need to be provided to the credit reporting agencies while still allowing consumers to save, and that information will in turn need to be used by mortgage lenders, she said.
“The push has been for consumers to go out and get credit because you have to get credit to get more credit,” said Bott. “The more we can get non-traditional debt to be evaluated, while not encouraging people to get credit if they typically wouldn’t for their lifestyle, the better.”