What’s my credit score? It’s a key question for anyone trying to buy a home, rent an apartment or get a loan. Historically, one of the biggest monthly expenses – rent payments – was not used by credit agencies in models for calculating credit scores. Rent Dynamics has been changing that with its RentPlus financial platform.
Apartment owners and managers have a front-row seat to a convergence of two key issues – demand for housing and the financial health of residents that allows them to attain housing and better quality of life. “Amidst the pressing challenges of housing affordability, the significance of building credit has now taken center stage for individuals. Considering the practicality of the matter, an increasing number of people are opting for multifamily homes, and they rightfully deserve the opportunity to enhance their financial lives by building credit, irrespective of prevailing economic factors,” says Alex Buchanan, Chief Operating Officer of Rent Dynamics. Those pressures have grown more intense over the past three years with COVID that shook up the economy and the way people were thinking about where they were living, he adds.
RentPlus has emerged as the leading rent reporting provider. The platform captures rental payment data directly from an operator’s Property Management System and reports on-time rental payments to the three major credit reporting bureaus. The reporting of on-time payments allows residents to build and establish their credit scores, while also offering value-added benefits to owners that include higher tenant retention and a reduction in delinquent payments. On average, RentPlus users see an increase of 42 points in the first year of using the program and an increase of 80% in on-time payments for property managers. “We’re helping residents build their credit and build a better financial future for themselves,” says Buchanan.
Building stronger credit
Traditionally, credit scores have been built largely from payment history for things such as utility, cell phone and credit card bills. Rent was only very minimally reported, primarily because the systems didn’t exist to easily collect and securely report on that information. Rent Dynamics not only designed RentPlus to seamlessly automate the rent reporting process, but the company has worked with the three major credit agencies to modify their credit models and accept rental payment information.
For residents, rent is the biggest bill they’re facing each month. “By reporting the biggest payment that they’re making each month, you can see progressive improvements in credit,” says Buchanan. For example, when looking at a group of people that are considered unscorable, just by reporting on their on-time rental payments over a 12-month period results in an improved score that is typically over 600, notes Buchanan.
The ability to improve credit scores simply by capturing rent payment information is gaining more attention across the housing industry, including among the GSEs that are working to promote equitable access to affordable and sustainable housing opportunities. Rent Dynamics recently announced a new partnership with Fannie Mae where for any property that used Fannie Mae financing, the agency will pay for 12 months of the RentPlus service for residents.
Value proposition for owner-operators
The RentPlus platform now services more than 1.5 million rental apartments across the country with demand coming across the spectrum of different from young professionals in Class A properties that may be looking to improve on credit to even C and D properties who need to establish or repair credit.
“RentPlus is really in tune with our core beliefs at Avenue5. We’re always focusing on solutions and providing RentPlus to our residents is viewed as an amenity because it can help our residents with building their credit,” says Tsanai Rankine, a project manager at Avenue5 Residential. The property management firm offers RentPlus as an optional program to residents at 36 of its properties spanning about 7,300 units.
RentPlus is a positive way for people to move the needle slowly as opposed to going out and opening a new credit card, adds Rankine. Rent Dynamics also provides added resources that include financial education tools, budgeting tools, and credit monitoring and fraud protection to help people build and then maintain good credit scores. For Avenue5, RentPlus has been a seamless integration. The RentPlus portal shows the manager if a resident is enrolled in the program, and if they want to opt-out, they can do it at any moment. “One of the things that is great about RentPlus is their customer service. They are very customer-driven,” says Rankine.
Bonaventure is another company that has seen tangible results since rolling out RentPlus across its 21-property portfolio in October 2021. The company achieved 80% enrollment in the first 12 months. And among its participants, 1,259 residents increased their credit score and 424 went from unscorable to scoreable.
Growing demand ahead
RentPlus offers a compelling value proposition for property owners. Helping to build better financial habits among residents has a direct benefit to the bottom line with lower delinquency rates and less renter turnover. “What we have seen across our client base is that residents that were using RentPlus were more likely to renew,” says Buchanan. “We also see a reduction in bad debt and late payments,” he adds. Part of the positive results is due to education. People are more aware of how a late payment impacts their credit score.
Owners and managers also can offer RentPlus as an added amenity that helps to differentiate their property that doesn’t require any investment of time or money on their part. RentPlus works in conjunction with existing property management rent payment system. “We’ve designed it to be really seamless for property managers to turn on, and the residents don’t have to make their payments in any different way,” says Buchanan.
Additionally, apartment owners and managers who want to advance social responsibility and ESG initiatives can use RentPlus to help residents achieve their financial goals, whether that is to buy a home someday or even be able to qualify for a car loan or small business loan. “What we’re seeing is more of a partnership. It’s not the big bad landlord anymore. The resident and the landlord are aligning for the better of the resident,” says Buchanan.
That partnership is more important than ever with a still significant shortage of housing and challenges to accessing affordable housing that are only getting bigger in the higher interest rate environment. “Housing affordability is not going to get better, anytime soon, and owners and managers are going to need to work harder to partner with their residents and offer solutions that can be largely beneficial for all sides,” adds Buchanan.