TransUnion’s Rental Screening Solutions recently found that credit scores on new rental applications improved only marginally this year after seeing greater improvements in previous years, suggesting a plateau is in sight.
Between Q2 2014 and Q2 2015, the average ResidentScore increased by only 0.2%, whereas the year prior saw a 0.9% rise. In dense urban locations, the increase was 0.41% in Q2 2015, after it had been 1.42% in Q2 2014, a 101 basis point drop.
“I wouldn’t say we’re seeing deterioration in the economy, but I would make guesses [that] what we’re seeing is the economy reaching this point where we’re starting to plateau,” says Mike Doherty, vice president of TransUnion's Rental Screening Solutions.
Since the Great Recession, Americans have worked hard to repair their balance sheets from home foreclosures and loss of income. Since 2012, when TransUnion started reporting ResidentScores, the rise in credit scores on rental applications had increased 0.6% from 2012 to 2013 and 0.9% from 2013 to 2014.
Dense urban locations are faring better than both suburban and rural locations, with a 0.4% year-over-year change from Q2 2014 to Q2 2015, compared with 0.3% and 0.2%, respectively. TransUnion broke out select MSAs in different geographic regions to show that some cities are still doing well overall: Dallas, Los Angeles, and Washington, D.C., all saw a 0.6% increase.
However, TransUnion also observed that average rental prices during the period were the highest in five years, with a 4.6% increase this year alone.
"It’s probably not a bad time to stop and [ask], Are we seeing some sort of peak in the economy, and do I need to start thinking about that coming down the road?" says Doherty. "Though, there is an opportunity to help individuals continue to improve their credit scores through rental payment reporting."