In order to determine the differences in credit and spending behavior between renters in the immediate post-recession and renters in the current recovery, TransUnion has analyzed the credit and spending behavior of two different groups of renters in the 12 months since their respective moves—775,000 renters who moved in the second quarter of 2009 and 631,000 renters who moved in the second quarter of 2015.
According to TransUnion’s State of Renter Credit Report, 38.6% of the 2015 renter group had a prime or better credit score (660 or above), compared with only 26.2% of the 2009 renter group. Almost half (48.8%) of the 2009 renter group had a credit score between 300 and 600, while just under a third (32.4%) of the 2015 renter group had credit scores at this level.
In the 12 months following their move, 28.7% of the 2015 renter group had opened a new credit card—more than twice the percentage (12.4%) of 2009 renters who had opened a new credit card by mid-2010. In addition, only 9% of the 2009 renter group opened a new auto loan within 12 months of their move, compared with 17.2% of the 2015 group.
The renter population has also skewed older between 2009 and 2015, according to TransUnion’s analysis. In 2009, 22.6% of all renters were younger than 25, but by 2015 that percentage had dropped to 20.3%. On the opposite end, the proportion of renters age 45 and up grew to 31.3% of the renter population in 2015, up from 23.5% in 2009.
“Following the [Great] Recession, younger consumers may have been underemployed or have chosen to live at home with their parents. Older consumers may have opted to stay in a rental unit instead of purchasing a home,” Mike Doherty, senior vice president of TransUnion’s rental screening solutions group, said in the report. “The good news for property managers is that renters of all ages are managing their credit obligations well. Property managers can help renters build their credit history by reporting rental payments to the credit bureaus, giving renters the credit they deserve for on-time payments.”
TransUnion also used its CreditVision aggregate excess payment (AEP) algorithm to determine the “excess income” present in each renter group after the monthly payment of all their debt obligations, including credit cards and auto loans. Out of the 2009 group, 53% had an AEP greater than $100, and by 2015 this proportion had risen to 59%.
“While renters in 2009 were facing a difficult economic environment, renters today also face challenges because of rising rental prices. Yet, significant economic changes have occurred [since] 2009, with a net overall benefit to renters,” added Ezra Becker, senior vice president of research and consulting. “Today’s renters are generally lower risk and more credit active in the 12 months following their move, taking on more auto loans and credit cards than previous renter cohorts.”