Half of American adults have a subprime credit score or no credit score at all. Without a good credit score, applying for a car loan, opening a credit card or getting a rental application approved becomes challenging, if not impossible.

Despite the enormous influence they wield in consumer financial markets, credit scores only provide a partial picture of a person’s financial stability and disproportionately penalize marginalized communities. As such, more and more governments and financial inclusion advocates have become interested in reforming credit scores to address these discrepancies.

A new study by the Urban Institute shows that rent reporting can effectively offset some of the exclusionary aspects of the credit score system. Rent reporting policies allow landlords and property management companies to report their tenants’ monthly rent payments to credit reporting agencies, in the same way that mortgage payments are reported now.

Pilot rent reporting programs have been enacted or announced in Washington, D.C., Colorado and Delaware. California now requires landlords operating subsidized housing to offer it to their tenants. Fannie Mae and Freddie Mac have both implemented rent reporting initiatives. While these are encouraging developments, the strength of the evidence for rent reporting means it’s time to go beyond such small-scale programs.

Why credit scores need reform

Credit scores were developed as a way to provide financial institutions with an objective measure to understand how likely a consumer is to pay back a line of credit on time. They take into account the number and type of lines of credit a person has open, their payment history for those lines of credit, and a person’s credit utilization ratio. The scores are on a scale from 300 to 850: 670 or above is considered good or “prime,” anything below 600 is considered “subprime,” and anywhere in between is called “near prime.”

A person with a prime credit score enjoys full access to safe consumer financial markets and receives credit at lower interest rates. This provides them with more flexibility when incurring large expenses, particularly unexpected ones.

The difference in interest rates between prime and subprime borrowers leads to significant disparities in the cost of borrowing. One scenario analyzed in a previous Urban Institute report found that a subprime borrower would end up spending almost $3,000 more on a $10,000 used car loan than a prime borrower. Non-financial institutions often utilize credit scores as well; landlords, insurance companies, utilities and even some employers will review a person’s score.

But credit scores are riddled with the same biases that plague American society. Minority and low-income communities are disproportionately more likely to have subprime credit scores, due to a deep history of discriminatory financial practices by private lenders and the government that has created large and persistent income and wealth gaps.

Marginalized communities not only start from a worse position, they also face more barriers when establishing their credit. Possessing lower levels of wealth and income makes it harder for a person to get their financial foot in the door and access their first line of credit. Further, evidence shows that discrimination in lending still exists. Asking minority and low-income communities to compete on the same credit score scale as well-off white communities is like asking a sprinter to start a 100-yard dash 25 yards behind the starting line – while carrying a 10-pound weight.

How rent reporting can help

The Urban Institute recently released a study showing new evidence of the effectiveness of rent reporting for expanding financial inclusion. Renters from six different locations across the country were randomly assigned into a treatment group, in which they opted-in to positive-only rent reporting.

The effects on consumers struggling to break into the mainstream credit system were significant. More than half of the treated participants that had no credit score before the study had a score five months later, and all but one of those participants’ scores were above the subprime threshold. Moreover, a third of treated participants with a subprime score at the start of the study were at near prime or better by the end.

What’s most striking about these results is that they were achieved in just four months, hinting at the possibility of even greater improvement over the course of years.

Rent reporting provides an easy access point to the credit system for people with little or no credit history. Crucially, it does so without asking financially vulnerable individuals to take on the risk of incurring debt.

It also means credit scores for renters will better reflect a person’s financial health, as rent is the largest monthly expense for most people. This creates a score that is more fair for consumers and more informative for financial institutions, landlords and other entities.

Although rent reporting is a race- and income-neutral policy, renters are disproportionately minority and low-income compared to the larger population, so they will especially benefit from its implementation.

This study is part of a growing body of research which shows that rent reporting is an effective way for cities and states to give their citizens a boost into the mainstream financial system. While the Urban Institute study was the first to establish causality with its random assignment methodology, other simulations and pre-/post-outcome studies show similar results.

All this demonstrates that policymakers looking for an effective way to boost credit access for financially marginalized communities should go beyond just dipping their toes in with pilot programs.

Now is the time to provide consumers with this needed assistance, especially as the country’s economic picture continues to darken. Every month of inaction is another month of consumers piling up debt to predatory lenders, families having rental applications denied, and workers having job offers rescinded because of a system biased against them.

As the Urban Institute’s results make clear, rent reporting should be the default in every city, not just an option for a fortunate few.

This post was originally published on Next City.