Many tenants think that building credit just requires them to pay their rent on time and in full. Although this is an important first step toward developing sound financial practices, it may not always have a direct effect on your credit score. Fortunately, rent-reporting services can help close this disparity by providing credit bureaus with proof of your consistent rental payment history, which may raise your credit score.
Understanding Rent-Reporting Services:
Rent-reporting services act as intermediaries between renters and credit bureaus. They gather information about your rental payments and submit it to the bureaus so that your timely payments can be taken into account when determining your credit score. Those with a short credit history or those trying to raise their credit scores may find this to be especially helpful.
Types of Rent-Reporting Services:
There are several types of rent-reporting services available, each with its own set of features and costs. Some services are free for renters, while others require a monthly or annual fee. Additionally, some services may require landlord participation, while others do not.
Popular Rent-Reporting Services:
- Esusu: This service reports your rental payments to all three major credit bureaus (Equifax, Experian, and TransUnion) and is free to renters if their landlord has a service agreement.
- Jetty: This service is part of Fannie Mae’s Positive Rent Payment program and is free to renters who live at participating properties. It reports rental payments to all three credit bureaus.
- PayYourRent: This service reports to all three credit bureaus and is typically paid for by landlords or property managers. Renters can opt in or out at any time.
- Rental Kharma: This service reports to TransUnion and Equifax and has a one-time setup fee and a monthly fee.
- Rent Reporters: This service reports to TransUnion and Equifax and has a one-time enrollment fee and a monthly or annual plan option.
Choosing the Right Rent-Reporting Service:
When choosing a rent-reporting service, consider the following factors:
- Cost: Compare the fees associated with different services, including setup fees, monthly fees, and any fees for reporting past rental history.
- Credit Bureau Reporting: Ensure the service reports to all three major credit bureaus (Equifax, Experian, and TransUnion).
- Landlord Participation: Determine if the service requires landlord participation and whether your landlord is willing to participate.
- Data Security: Choose a service that prioritizes data security and protects your personal information.
Additional Considerations:
- Not all credit scores consider rent payments: While some newer versions of FICO and VantageScore incorporate rent payment data, not all credit scores do.
- Landlord verification may be required: Some services may not be able to report your payments without landlord verification.
- Disputes with landlords: Find out how the service handles disputes with landlords, especially if you withhold rent due to legitimate reasons.
While it may not have a direct effect on your credit score, paying your rent on time is an important first step in developing sound financial habits. By informing credit bureaus of your consistent history of on-time rent payments, rent-reporting services can assist in closing this gap and possibly raise your credit score. You can maximize the advantages and raise your credit score by selecting the best rent-reporting service by carefully weighing the previously mentioned factors.
Bonus Tip:
In addition to using rent-reporting services, consider other strategies to build credit, such as becoming an authorized user on someone else’s credit card, getting a secured credit card, or taking out a credit-builder loan. These strategies can further enhance your credit score and help you achieve your financial goals.
How do rent payments appear on my credit report?
When theyâre reported, rent payments appear on your credit report as something called a tradeline. Thatâs just an industry term for the account information on a credit report, according to the CFPB. Tradelines can include account information such as payment history, account status, account activity and account history.
The three major credit bureausâEquifax®, Experian® and TransUnion®âsay they include rental payment tradelines in their credit reports. But thatâs only if they receive the information. You can read more in the next section about how that happens.
You can monitor your credit with CreditWise from Capital One. It allows you to access your TransUnion credit report and VantageScore 3. 0 credit score without hurting your score. Plus, itâs free for everyone, whether youâre a Capital One customer or not.
How do rent payments affect credit scores?
If rent payments are being reported to credit agencies, there are a number of ways in which that information may impact your credit scores. There are multiple credit scores. Therefore, two important factors are the credit-scoring company and the formula (also known as a credit model) that they used to calculate the score.
According to the CFPB, credit scores are commonly determined by elements such as payment history, the quantity and kind of balances, credit utilization, and the age of credit accounts.
But thereâs a catch when it comes to rent payments: Not all scoring models use them. Some do, such as VantageScore® 3. 0 and 4. 0 and FICO® 9. But FICO 8, which FICO says is still its most popular scoring model, does not.
And remember, ultimately all credit decisions are up to individual lenders.
If your rent isnât reported to a credit bureau, it wonât show up on your credit report. If you believe that paying your rent on time will improve your credit, you could start by finding out if your property manager or landlord reports rental payments.
Unfortunately, if your rental payments arenât being reported, you canât just do it yourself. But there are rental reporting services that might be able to help. Some even have direct partnerships with the credit bureaus.
But be sure to do your research or talk to a professional before you sign up. These businesses may charge for their services, so be sure to find out what information is being reported and to whom.
Does Paying Rent Build Credit?
FAQ
Does paying your bills on time build credit?
Why doesn’t paying rent build credit?
How long does it take to build credit to rent an apartment?
How can I add my rent to my credit report?
Does Paying Rent Build Credit?
“Paying rent can build credit if your payments are reported,” says Rod Griffin, senior director of consumer education and advocacy for the credit bureau Experian. “Unfortunately, that’s not the norm, as most landlord and rent management companies don’t report rent payments.”
Does paying rent on time help your credit?
If you’re good about paying your rent on time and think it could help your credit, you might start by asking your landlord or property manager if they report rental payments. Unfortunately, if your rental payments aren’t being reported, you can’t just do it yourself. But there are rental reporting services that might be able to help.
Do rent payments affect your credit score?
The latest versions of VantageScore ® (4.0) and FICO ® Score (Score 9) use rental payments that land on your credit report as elements to generate your credit score. If you regularly pay your rent on time and in full, you can have your good payment history reported to credit bureaus to help raise your credit score through a rent-reporting service.
Does on-time rent increase my credit score?
When you are looking at VantageScore ® 3.0/4.0 or FICO ® 9 and you are enrolled in a rent-reporting service, your on-time rent payments could increase your credit score with each on-time rental payment (assuming all of your other credit accounts are also in good standing).