Many Californians have housing woes due to their credit history. This is because landlords seek out renters with strong credit scores when they're going through the tenant screening process. A new law may have a significant influence on opening up opportunities for tenants by giving them a chance to bolster their credit rating.
On July 1, 2021, California's Senate Bill 1157 went into effect. It is scheduled to expire on July 1, 2025, but it may be renewed in the future. The bill requires operators of certain subsidized multifamily units in California to give tenants the option to have their rent payment reported to a major credit bureau.
Lawmakers created this bill to help low-income individuals and families build their credit history without getting a new line of credit. Some renters may have low credit scores because of mitigating circumstances or due to temporary situations.
SB 1157 is unique in that it's one of the first of its kind in the nation to use rent payments to assist individuals in improving their credit scores with a mandate for landlords to give all tenants the option to report their rent payments.
If you’re a tenant who lives in one of the qualifying buildings, then your landlord must provide you with documentation concerning rent reporting (written election) that includes the following:
If a tenant decides to have their rent payments reported, landlords can require them to pay the lesser amount of either the actual cost to the landlord to report the payments or $10 a month. Keep in mind that renters paying (or not paying) this fee will not be included in reporting to the credit bureau; only the rent payments are reported. To comply with the law, landlords should tenants about this at the time of the rental agreement.
In making a decision of whether to opt-in or not, the benefit is that your rent payments can help you establish a positive credit rating. This can be a significant step to eventually owning a home. However, it can be harmful because all of the payments are reported; if you get behind or make late payments, that can have a negative impact on your record.
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