Reporting rental payment information to credit bureaus has drawbacks, especially for lower income renters. The National Consumer Law Center has published a paper on the issues presented when rental payment information is automatically reported to the credit bureaus. Even the Catch-22s Come with Catch-22s: Potential Harms and Drawbacks of Rent Reporting gives a brief overview of the problems that may arise for many renters, namely that many landlords will not rent to those who have been late on rent, or they will charge those tenants more in rent or deposits. If rental payment information is sent to the credit bureaus, many renters will be unable to find housing or will be forced into untenable situations. The National Consumer Law Center provided the following three policy suggestions to protect tenants:
- Rent reporting should be positive info only. Over 90% of landlords use credit reports; negative information about missed rent payments could prevent a renter from obtaining decent housing, even driving them to homelessness;
- Rent reporting should always be opt-in, not automatic (opt-out). This helps avoid inclusion of harmful negative information and provides control to the tenant. And renters sometimes are forced to pay for rent reporting, therefore, it should require their permission; and
- For mortgage underwriting, there’s a better way to obtain rent payment data – by using bank account transaction data to supply it, which is what Fannie Mae and Freddie Mac are already allowing in their automated underwriting systems.