Rent to Credit in Practice

L. Howard of Wilmington, Delaware, struggled with bad credit and the doors it closed for her and her son. Years of people putting things in her name and consequential personal financial decisions, like routine overdrafts, led her to “hit rock bottom” until she took advantage of a rent-to-credit program that gave her back control in her life.

Ms. Howard shared with Engage how hard it is to move forward financially and mentally when you are hindered by bad credit. She describes the financial decisions she made in her past as a form of “self-sabotage.”

When a trusted friend and advisor at Friendship House, which supports people experiencing homelessness, told Howard about the idea of using rent payments to improve her credit score, she admits she was skeptical at first, but the decision has dramatically changed circumstances for Howard and her 14-year-old son.

Over the course of just a few months, she saw her score start to improve significantly. This better state of financial health not only positioned her to begin to apply for loans with confidence, but it also gave her the motivation she needed to pay off debts and get other rooms of her financial house in order. “Seeing the numbers going up gave me motivation,” Howard said. “It just felt good to be eligible for a credit card, even if I didn’t want it.”

With her stronger credit rating, Howard finally succeeded in securing a loan for a car. Having her own car not only makes it easier to get to and from work, but it is also helping her save money. She couldn’t always rely on public transportation — especially when she needed to get her son after work — and was spending half of her paycheck on rideshares. Now, even with car payments and occasional repairs, Howard is still putting more money away than before.

Ms. Howard has also now moved into a nicer apartment building in a community where her son has access to teen centers that offer financial and business classes. Given her own experience, she recognizes how important these types of skills are and wishes she had been taught about the day-to-day management of money and how to budget and save.

A 2019 study by the U.S. Department of Housing and Urban Development found that:

• The rate of residents with no credit score fell from 49% to 7% using one score model and from 11% to 0% using another score model, nearly eliminating unscorability with the addition of the rental tradeline.
• The share of renters with a score above 620 increased by 65% after adding the rental tradeline. (A score of 620 or more will generally qualify consumers for most financial products including conventional mortgages.)