For more articles on credit scores
View these articles and more at
“Stay on the Straight and Narrow With Credit Repair,”
Dave Schram, February 2017
“How to Fix FICO Scores,”
Ali Zane, November 2016
“Expanding the Box of Opportunity,”
Matthew J. Tomiak, November 2016
“Transform Turndowns Into Done Deals,”
Alexis Stuart, October 2017
Are you aware that more than 45 million adults in the United States have no credit score? It is not that these people have bad credit. They simply are not in the
Many mortgage originators are not familiar with this
huge untapped market for first-time homebuyers because it is assumed that anyone without a credit history
simply will not qualify for a home loan. Many of those
included in this large unbanked segment of the population, however, are actually financially able to purchase a
house, with ready cash and good-paying jobs.
These hidden first-time homebuyer prospects are
eager to buy residential property and take advantage
of today’s still-affordable interest rates. Unfortunately,
because they do not have credit cards, auto loans, student loans or personal loans, they do not exist in the
databases of the top three credit bureaus.
Expanding the box
Uncredited market segments, such as many recent
college graduates, millennials, divorcees, legal immigrants and others, are financially invisible “ghosts” to
lenders. Without a credit history or credit score, getting approved for a home mortgage might seem difficult, if not impossible.
Obviously, credit histories and scores are an important consideration in a creditor’s due diligence in
the complicated process of approving someone for
a mortgage. Forward-thinking mortgage originators
and Realtors, however, are recognizing that this untapped market may be a lucrative opportunity and
are pursuing creative tactics to quickly establish good
credit credentials for prospective homebuyers to meet
Concerned renters want to become first-time homebuyers because of rising rents and difficult landlords
encroaching on their private spaces. These individuals
are often motivated to avoid annual rent increases by researching ways to secure a 30-year, fixed-rate mortgage.
Rising rents are especially a big problem in America’s booming metropolitan markets. Many former
urban dwellers have relocated to suburban or smaller communities for employment and more affordable
housing options only to find that their lack of a credit
history excludes them from pursuing a home purchase
that they may actually qualify for in terms of income.
With interest rates still relatively low, this is a good
time to buy a home and secure a 30-year, fixed-rate
loan. If these uncredited renters can secure a home
loan, they would save thousands of dollars in interest
over time because rates are sure to rise in the coming
years. This is where mortgage originators can step in
and assist these prospective homebuyers in overcoming their credit-history challenges and expand business opportunities at the same time.
A helping hand
Renters (and a large number of loan originators) do
not realize that monthly rent payments are eligible to
be included on a credit report and used by lenders in
making loan decisions. Establishing credit is critical,
given it is a key metric used by lenders when deciding
whether to approve a home loan.
With growing awareness, knowledgeable mortgage originators and Realtors are referring renters that
come through their doors to companies that offer on-time rent-reporting services. These services disclose
rental payment histories to credit bureaus, helping
renters quickly create a credit history.
The online services are able to bridge the gap between renters and credit bureaus to quickly establish
credit histories for individuals. This, in turn, helps mortgage originators because it provides a new tool to help
their clients meet lender requirements for home loans.
In fact, the referrals received by on-time rent-reporting
services often come from forward-thinking originators
and Realtors who are willing to wait for prospective
homebuyers to build solid credit histories and scores.
These services usually offer one of two options: past
reporting or ongoing reporting. With past reporting,
renters can add up to two years of rental-payment history to their credit-bureau files in as little as two weeks.
Renters also have the option of providing proof of ongoing on-time payments. Including this latter option
allows a renter to continue building a credit history until they are ready to complete the home-loan process.
Vet before using
Online signup is easy and the cost of using a rent-reporting service is generally inexpensive. Renters
simply log onto a rent-reporting service website and
fill out a short application that authorizes their landlord or property-management company to confirm
proof of on-time monthly rental payments. The rent
payments are then reported to the credit bureaus,
enabling consumers to generate a credit history
Some originators may question whether rent payments alone can quickly establish an acceptable credit history. Thanks to social media, such as Facebook,
Google and Yelp, there are hundreds of internet
reviews for rent-reporting services. Customers of
services are sharing personal accounts about how
their credit situation changed for the better as a result
of using rent-payment reporting and how they were
able to qualify for a home mortgage.
On-time rent-payment services offer varying levels
of money-back guarantees that should be compared
when selecting which service to use, and originators should advise individuals to thoroughly vet the
rent-reporting service to ensure it is not a scam. One
way to do that is to check with the credit bureaus to
ensure the reporting service is legitimate.
n n n
Mortgage originators now have a useful tool for
turning once credit-challenged applicants into viable
homebuyers with solid credit histories. Progressive
originators are learning how to use these rent-payment services as a marketing tool to attract new
prospects. Helping these qualified candidates purchase
their dream homes can be a rewarding opportunity
for mortgage originators and Realtors searching for
unique ways to grow their business. n
Cullen Canazares is CEO and founder of Denver-based
Rental Kharma, a leader in on-time rent-reporting services.
Rental Kharma was founded to provide a simple way for
renters to establish and build credit history through their
largest monthly payment: rent. Canazares also founded ISP
Leapfrog Internet in 2001 and recently graduated from the
Stanford University Graduate School of Business’ Latino
Entrepreneurship Initiative program. For more information,
go to rentalkharma.com. Reach Canazares at
Uncloak the Financial Invisibles
Rent payments can help build credit histories for prospective homebuyers
By Cullen Canazares