New Freddie Mac Initiative Helps Owners Who Help Renters Build Credit

Freddie Mac will provide closing cost credits on multifamily loans for owners of rental properties who agree to report on-time rental payments through a new reporting platform that helps renters build better credit scores.

Presently, less than 10% of renters see their on-time rental payment history reflected in their credit scores, inhibiting their ability to access credit or obtain competitive rates for a range of financial products. 

However, based on internal data from Till, a provider of personalized financial solutions for the rental housing industry, 99% of residents with the option for a credit builder, a free rent-reporting solution, are enrolled in the program.

“Offering financial tools with a free credit building feature is immensely valuable for many renters who watched theirs take a major hit during the pandemic,” David Sullivan, Founder & CEO of Till, tells GlobeSt. “The cause is aided when the credit reporting service is free for both residents and operators. It is a mutually beneficial amenity that we’ve seen success with for both renters and properties.”

Helping Renters Gain Home Financing

Freddie Mac’s initiative, which incentivizes rent reporting via technology created by Esusu Financial, will deliver on-time rental payment data from property management software platforms to the credit bureaus. It will automatically unenroll renters when missed payments occur, preventing harm to those who struggle financially.

“Rent payments are often the single largest monthly line item in a family’s budget but paying your rent on time does not show up in a credit report like a mortgage payment,” said Michael DeVito, CEO of Freddie Mac. “That puts the 44 million households who rent at a significant disadvantage when they seek financing for a home, a car or even an education. While there remains more to do, this is a meaningful step in addressing this age-old problem.”

The platform manages the reporting rental payments to all three major credit bureaus while ensuring compliance with industry standards. This solution eliminates the administrative and compliance burden for property owners, which has been the largest hurdle facing industry efforts to report rental data. Esusu even reports up to 24 months of past on-time rent payments, resulting in an immediate positive impact to credit scores.

“At present, the most common way for rents to be reported to the credit bureaus is when there is a missed payment that has gone to a collections agency,” said Alexis Sofyanos, senior director of Equity in Multifamily Housing at Freddie Mac. “Freddie Mac wants to flip that script, so that renters who pay their rent on time and in full each month get credit for doing so, while also putting in safeguards for the most vulnerable.”

In addition to helping renters build credit, Esusu’s platform helps renters verify their rental history.