Rent reporting is affecting tenants’ credit scores

In New York City, there's been an uptick in landlords reporting tenants' rents to credit bureaus, and not all renters are happy about it.

Credit scores can have a big impact on our financial futures. Banks and other lenders use credit scores to determine whether someone may qualify for an auto loan, a credit card and even a mortgage. People with low credit scores may lose access to these types of borrowing options.

In New York City recently, more landlords have started reporting tenants’ rent payments to credit bureaus. While on time payments can help build tenants’ credit scores, tenants who miss payments or withhold their rent may see their credit scores negatively affected. Clio Chang, a writer at Curbed, wrote about what these new initiatives have meant for tenants who have been opted in to these rent reporting programs.

“Marketplace” host Amy Scott spoke with Chang about her reporting. Below is an edited transcript of their conversation.

Amy Scott: Landlords have had the option to report this information for a long time. Why are they just doing it now?

Clio Chang: Yeah, so I asked some of the people who work in the housing and consumer advocate space, and they’re saying that they’re definitely seeing an increase. They’ve always been able to do this. But part of it is because of in 2019, there were stronger rent laws passed in New York, that made tenant protections stronger and made it harder for landlords to deregulate apartments. At the same time in 2020, we obviously had COVID and there was an eviction moratorium in New York. So that sort of held up courts for a long time. Tenants couldn’t be evicted. I think in response to that, landlords got a little desperate and we’re looking for new ways to basically pressure or harass tenants to make them pay rent. So, this was one of the tactics that they have been picking up on and I assume sharing among themselves. So we’re seeing more of it.

Scott: So, talk about what this means for tenants. I wonder if you could talk about Deborah, a woman you spoke to and what it has meant for her to have this information reported to the credit bureaus.

Chang: Yeah, so Deborah is a tenant in a Harlem six-story building, and she was having trouble as were other tenants in the building with their landlord taking care of maintenance stuff. Elevators weren’t working, you know, she would tell me about rats in the walls, just some bad apartment conditions, basically. So, her and a few other tenants in the building were withholding their rent to pressure their landlord. And she said that recently over the summer she got an email from her landlord, as well as other tenants did, that said that they were going to enroll them in a new program where they were going to report their rent to the credit bureaus. And now she’s saying that her credit is now getting tanked.

Scott: What does it mean for a tenant if their credit score is negatively impacted? Could it affect their ability to rent in the future?

Chang: Yeah, definitely. I’m sure as you’re aware, credit scores run so much of how we live in this country. So, for someone like Deborah and for the other tenants in the building it affects whether they can get a loan for a car, whether they can get a mortgage. But the interesting thing is it also affects whether you can rent in a new place. One of the biggest things that landlords look at when they’re deciding whether or not to rent to a tenant is their credit score. So if your credit score is affected negatively, because of a dispute that you’re having with your current landlord, and they’re reporting your late rent, or missed rent, even if it’s for a totally legal reason, then that might affect your ability to move out of that place, and get a new apartment, because landlords are going to be looking at your credit score. It’s sort of this like savvy way to basically soft blacklist tenants from getting apartments.

Scott: I’ve been covering housing for several years, and I’ve talked to a lot of property owners. During the pandemic, many of them felt they were unable to evict tenants who were not paying rent and had little recourse. On their side, is there a reason they’re turning to this as an other sort of collection tool, basically a threat of hurting someone’s credit score?

Chang: Yeah, I mean, it’s, it’s a lot easier than going to court for sure, it’s something you can do right away. I think there’s a fee that they do have to pay to these agencies to report this stuff. But if you can sort of negatively affect your tenants credit score immediately by reporting this, then that’s a lot quicker a way of sort of pressuring and getting what you need than going through other avenues.

Scott: On the flip side, paying the rent on time can help build credit, and some consumer advocates have been pushing the credit bureaus to use this information to help people build good credit who might not otherwise have a chance to do that. Are landlords reporting regular payments? And do we see this actually helping people occasionally?

Chang: I mean I can’t speak for all landlords. It really depends. I think that some of them are probably reporting on-time payments. And for some people who are underbanked, this might be one of the few ways they can build credit. But I think what’s often not being said in these notices when tenants are enrolled in these programs is that there’s no opt-in or opt-out option for tenants. If they want to do it, or if they don’t want to do it. And so, the advocates I spoke to and the lawyers I spoke to said that at the minimum tenants should be able to choose whether or not they want their payments reported and it shouldn’t be an involuntary thing.