landlords and tenants

Landlords Are Tanking Their Tenants’ Credit Scores

Photo-Illustration: Curbed; Photos: Getty

Deborah received an email over the summer from her management office announcing an exciting new program it had implemented for all the tenants in her six-story Harlem building — relaying their rent payments to credit reporting agencies. “By making timely payments, you can see an increase in your credit score,” the letter read. “Good credit is priceless!”

Unspoken in the email was what happens when tenants aren’t paying their rent on time. At 137 West 141st Street, about a quarter of the tenants, including Deborah, had been withholding their rent since the pandemic because of poor conditions in the building — the elevators were often down, there were rats running through the walls, the heat and hot water were frequently shut off. They brought their issues to housing court to try to get them fixed, but some cases were dismissed and one is still ongoing. Despite the legal measures they’ve taken, they say the landlord, Guardian Realty, which owns nearly three dozen residential buildings across the city, only fixes things sporadically and will sit on problems for months. (One tenant, Chico Knight, is considering paying for his own exterminator to rid his apartment of mice.) As the years dragged on, momentum faded and people started dropping out of the rent strike. Now Deborah and her roommates are among the few holdouts remaining, and she has already seen the new program affect her score. “About a month ago, my credit took a huge hit,” Deborah said. “This ensures it squashes out everyone except for the extremists — we’re definitely paying a price.”

While landlords have long been able to report tenants’ payments, few did so. But now, housing and consumer advocates say that they’ve seen more of them use the threat of hurting tenants’ credit scores since pandemic-era eviction moratoriums and stronger rent laws passed in 2019. “Landlords are looking for any sort of stick that they can use as a collection tool without having to go to housing court,” said Tashi Lhewa, a Legal Aid Society attorney.

In the past, said Mary McCune, a lawyer at Manhattan Legal Services who is advising the tenants in Deborah’s building, she’s seen landlords offer rent reporting as a voluntary option. But now, more and more are unilaterally enrolling their tenants. Linda Holmes, a staff attorney at Legal Aid, told me that some tenants she’s worked with have even been charged $25 extra on their rent bills for credit reporting fees. “It could really have a chilling effect on people’s willingness to withhold rent,” Holmes said, which is especially troublesome in situations when exercising this legal right is the only way a tenant can get a landlord to make repairs. At minimum, Lhewa believes that there should be a legislative fix that ensures rent payments can only be reported if tenants opt into it.

The notices, like the one sent to Deborah, often frame the reporting programs as a good thing. It’s true that for much of the population that is underbanked, rent payments might be one of the few ways they can build credit. (Reporting on-time rent payments has been an initiative pushed by lenders like Fannie Mae and former comptroller Scott Stringer.) But negative credit reports can be disastrous for most major life milestones — getting approved for a new lease, buying a car, mortgages, loans. “It’s almost like a bullying technique,” said Knight.

Some also worry that this will permit landlords to penalize tenants who have been to housing court. Currently, it is illegal for a landlord to blacklist tenants — essentially, refuse to rent to someone because they’ve been to housing court — but advocates fear that downgrading someone’s credit rating may be used as a way to get around that law, since most landlords look at credit to determine whether or not to rent to someone. “They could say it’s because they don’t think the person can pay the rent because they have a poor credit history and it’s not related to them being sued,” McCune said.

And then there’s the issue of a landlord incorrectly reporting late rent. Lhewa noted that it’s already common for big lenders to submit inaccurate information, “but with landlords, it’s a hundred times worse. Any landlord could just start reporting to the credit bureaus.” (Just this fall, the Consumer Financial Protection Bureau and FTC reached a $23 million settlement with TransUnion, one of the big three credit bureaus, for inaccurately reporting tenant screening information like eviction records.) A tenant could dispute the mistaken late-payment report with the agency, but Lhewa says it will usually try to verify the information the tenant supplies by sending it to whoever reported it in the first place — which, in this case, would be the landlord. A tenant could also file a lawsuit against the credit bureau, but would usually have to do so in federal court, where the Fair Credit Reporting Act is enforced — an onerous process few would have the resources to take on, and would require proof of the financial damage the report caused.

Lhewa says that if a landlord is accurately reporting late rent payments, there’s not much a tenant can do to dispute the issue — even if they’re legally withholding rent — until they get a court judgment in their favor, which could take years. Deborah, the Harlem tenant, is exploring her options — talking with lawyers and potentially looking into contesting the rent reports with the credit bureau — but in the meantime, her score is dropping. “Credit in this country determines so much of what you’re able to do in your life,” she said. “It’s scary to see it go lower and lower every month.”

Landlords Are Tanking Their Tenants’ Credit Scores