Getting a credit check is just one of the many hoops that New Yorkers often have to jump through when renting an apartment in the five boroughs—and yet, a history of paying rent on time is not something that positively affects a person’s credit score. While homeowners who pay a mortgage—and pay it on time every month—will see the benefits in their credit score over time, renters have no such privilege; and indeed, paying rent late can even negatively affect someone’s score if they don’t pay on time.
Sounds unfair, right? That’s what city comptroller Scott Stringer thinks—and he’s hoping to change the way landlords and credit bureaus work for tenants. Today, his office released “Giving Credit to Renters: How Reporting Rent Payments Can Lift NYC Credit Scores,” a report outlining the benefits of linking on-time rent payments to credit scores.
As part of its study, Stringer’s office studied a sample of NYC tenants paying less than $2,000/month, and found that 76 percent of renters would have a higher credit score if rent history was factored in.
Most low-income New Yorkers are categorized as “invisible,” or “unscorable,” where it concerns credit scores, and reporting rent history would create a credit score for nearly 30 percent of the city’s renters for the first time ever.
The lack of factoring in rent towards credit scores primarily affects low-income New Yorkers and people of color. NYC’s average credit score is 673, but in neighborhoods with average credit scores below 630, black and hispanic New Yorkers accounted for 90 percent of the population. Furthermore, 78 percent of residents in these neighborhoods rented their homes; whereas neighborhoods that report higher credit scores generally have a higher percentage of ownership (like the Upper East and West Sides in Manhattan, and Bayside in Queens).
There’s some precedent for this kind of reporting: the New York City Housing Authority currently has a program in place that gives residents the option of reporting their rent payment to credit bureaus; however, according to the New York Times, it’s barely used—only one person had opted into the program when they checked in.
Stringer now wants to launch a working group with stakeholders from across the city to create and implement different strategies that will benefit tenants. The report also doubles as a proposal, with various measures recommended to help
“If you’re low-income and don’t have credit, this is a commonsense solution that would help,” Stringer said in a statement. “With New York City becoming increasingly unaffordable, we have a chance to mitigate that massive challenge and make it easier for residents to get by.”
Among the suggestions include allowing NYCHA residents to opt into a credit reporting program that would expand on the existing pilot partnership NYCHA has with the Brooklyn Cooperative Federal Credit Union and Urban Upbound Federal Credit Union, which in turn report rent data to credit bureaus; Incentivizing landlords and property managers to offer these opt-in programs to their tenants; and urging banks and credit unions to come up with innovative strategies to report rent history to credit unions.
“Allowing New Yorkers’ rent history to boost their credit scores is a simple solution to a real, long-standing problem afflicting New Yorkers, and it’s another way to whittle away at our affordability crisis,” Stringer said in a statement.