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SB 1157 Becomes Law: California’s First-in-the-Nation Rent Reporting Bill

This fall, Governor Gavin Newsom signed California Senate Bill (SB) 1157, creating a historic new avenue of credit-building opportunities for low-income families in the state. At a time when so many households are struggling to make ends meet in the midst of a pandemic and recession, this law offers a credit-building lifeline. Authored by Steven Branford (D-Gardena), the new law will give tenants living in subsidized housing an opportunity to have their rent payments reported to major credit bureaus, enabling them to continue safely building credit even after this crisis.

MAF sponsored SB 1157, in partnership with the Credit Builders Alliance and Prosperity Now, because we believe in the lasting impact that rent reporting can have in helping many Californians establish or build their credit scores. For over 15 years, we’ve led the charge to bring low-income and immigrant communities out of the financial shadows by offering non-traditional paths to credit-building opportunities. From Lending Circles to SB 896, MAF has continuously strived to not only meet people where they are in their financial journeys, but uplift the strategies that recognize their strengths and help them participate in the financial mainstream with dignity. Through SB 1157, we continue to act on a vision of honoring good practices already taking place by formally recognizing them and elevating them to the mainstream.

Over 45% of Californians rent their housing, and unlike homeowners who can build credit through their mortgage payments, renters cannot do the same even when making on-time payments.

Failure to pay rent, however, has a negative impact on a renter’s credit score. Without a decent credit score, renters stand to be left out of essential services, such as loans for buying a house, obtaining basic utility services or cell phone plans, and getting credit cards. As a result of current uneven credit reporting practices, renters are seven times more likely to have a minimal credit history deemed unscorable by credit bureaus compared to homeowners. The monetary and logistical barriers associated with reporting requirements often discourage landlords from submitting full rental payment histories to credit bureaus. Yet, the evidence on rent reporting data shows clear and consistent results: full rent reporting plays a critical role in helping people without credit scores establish one and helps those with low scores improve theirs.

Rent reporting to major credit bureaus will offer low-income renters an opportunity to build credit as a financial asset while helping them rebuild for a post-pandemic world.

SB 1157 is tailored to tenants most likely to receive the greatest benefit from establishing or improving their credit scores. It offers a first of its kind solution to rent reporting credit discrepancies, opening up lines of credit-building access for tenants living in subsidized housing and giving them the opportunity to enter or stay in the financial mainstream during this pandemic. In keeping with our values, this bill meets people where they are by giving tenants the financial tools they need to exercise them at their own time and within their own context.

Having good credit is an asset that needs to be cultivated and sustained, especially during unexpected financial shocks where low-income families are most likely to be hit hardest.

People’s financial lives have been unraveled by COVID-19. In a state where there is already a massive shortage of affordable rental homes and where an increasing number of tenants are at risk of eviction due to the economic downturn, California’s low-income families should not have to bear the brunt of this pandemic any further. People’s livelihoods continue to be on the line, and SB 1157 can give low-income renters an opportunity to maintain some semblance of a financial footing as they continue to tackle asset-building barriers. This new law will allow low-income Californians to not let their credit histories fall through the cracks, giving them a fighting chance in the recovery of this pandemic.

From direct relief to state-wide systemic changes, we continue to put clients at the forefront of the products and policies we advocate for. With SB 1157, we’re another step closer to providing the low-income and immigrant communities we serve with access to the tools they need to increase their financial well-being.