'The only app you need to build credit': What's behind Self's acquisition of RentTrack – Tearsheet - Tearsheet

On February 17, credit building fintech Self Financial announced it was acquiring RentTrack, a credit reporting company that facilitates credit building through reporting rent. 
The acquisition gives Self access to two things – one is RentTrack’s rent reporting solution, which allows property managers to report rent payments to the three major credit bureaus – this tool is currently used among 2.8 million rental units in the US. The other is the company’s consumer solution – LevelCredit – which gives consumers autonomy to build their own credit by reporting both utility and rent payments on their own.
So far, Self Financial’s products have been its Credit Builder Account, which builds payment history that is reported to the three credit bureaus, and the Self Visa credit card – a secured credit card. Users choose their credit limit – at least $100 – to secure the card and set a spending limit.
There are certain steps consumers need to take to build credit with Self. First, they need to sign up for a Self Credit Builder Account. Through the credit builder account, they apply for a loan that is held in a CD by Self’s partner banks, make monthly payments to build credit history and customers can access the funds at the end of the term, minus interest and fees. Once they reach $100 in savings and make three on-time payments, customers can be eligible to get the card, which offers a second opportunity to build credit history.
With the recent acquisition, Self is able to go beyond offering credit builder accounts and being a secured credit card provider, and offer other credit building services as well.
“By integrating RentTrack into the Self app, Self customers will soon have a new way to build credit using existing rent and utility payments,” said James Garvey, CEO of Self. “With credit scores often being a make or break factor in buying and renting homes, qualifying for jobs, insurance rates, and more, this acquisition could have a big impact on millions of credit-challenged renters.” 
Using alternative data to build credit has historically been difficult, says Garvey. The main obstacle was finding a way to process such a large body of data. “Consumers weren’t able to have data reported because of irregularity in the rental industry and limited options for them to report rent and utility payments themselves.”

The number of credit building choices is rising, though, as the alternative data industry continues to grow. Meanwhile, companies like Experian are making credit access easier, with new tools like Experian Boost and Experian Go putting more control in the hands of the consumer.
Finally, there’s the Senate Bill 1157, which California passed in 2020. The new law means property management companies and landlords getting public housing assistance have to offer rent reporting to their tenants. Meanwhile, in 2021, Colorado passed House Bill 21-1134 – a program of rent reporting to credit agencies. The pilot program, which was rolled out through partnership with RentTrack, focused on helping people in marginalized communities build credit without getting into debt. 
Still, there’s more that needs to happen before alternative data can be used on a mainstream basis to measure creditworthiness. Right now, alternative data isn’t a must-have within the Fair Credit Reporting Act, according to Tricia Tetreault, financial analyst at FitSmallBusiness
“In order for alternative credit history to be incorporated fully into one’s credit report automatically, Congress would need to amend this Act to detail the reporting requirements for the alternative credit source provider,” said Tetreault.
And zeroing in on specifically reporting rent – legacy systems may be some of the culprits keeping the practice from becoming commonplace. 
According to Anthony Martin, CEO and founder of insurance agency Choice Mutual, newer versions of FICO, like FICO 9 and FICO 10, do factor rent into credit scores. However, a lot of lenders are still using older versions, which don’t look at rent. On top of that there’s still no real legal obligation for landlords to report rent payments.
“Therefore, even your FICO 9 scores won’t reflect any positive rental payment habits if you or your landlord don’t report it,” said Martin.
This may be good news for companies like Self, which are stepping in as viable alternative options to building credit.
“[These third party intermediaries will], for a fee, compile information—like your rental history—and report it to the credit bureaus on your behalf,” said Tetreault.
As for what’s next for Self – the company wants to build an ecosystem around credit building.
“We want Self to be the only app you need to build credit. That means we’ll continue to explore and launch products and partnerships that offer new access points to credit,” said Self’s Garvey. 
“We’ll also keep investing in new ways to enable our customers’ success and to help them reach their long-term goals.”
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