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Credit reports are a big part of our adult lives. We learn the importance of having a good credit score early in life. Good credit usually refers to a score of about 660 or higher. A good score reflects on your adult financial responsibility. With a favorable score, borrowers can qualify for loans, the best credit card deals, and the best mortgage rates. An excellent credit score may also help you land a good job and score more favorable terms on phone bills.
Having a lower score, on the other hand, can lead to high interest rates. It often requires a much larger downpayment (with a lower chance of approval). A low score can result from several factors influencing ratings – it is essential to educate yourself on how scores are calculated. There are, however, many ways of building – or rebuilding – credit. Besides using a credit card and paying off debt, one of the lesser-known ways of building credit is to report rent payment history to credit bureaus.
Reporting Rent Payments to Credit Bureaus
Submitting your rent payment history to credit bureaus is one of the best low-cost ways to build credit (why not get credit for something you’re already doing?) Timely payments are proof of personal financial responsibility and qualify as credit-building strategies. All three major credit bureaus -Equifax, Transunion, and Experion, will include rent payment information in credit scores if they can receive it. This data goes into your credit report, therefore improving your score. The trick here is ensuring the credit bureaus receive the information. Otherwise, it won’t have any impact on your score.
Credit bureaus do not automatically gather rent payment information. This is because rental payments are considered non-traditional credit tradelines. As non-traditional, creditors are not required to report them to bureaus. The most straightforward or non-hassle way to get this information reported is to use a rent reporting service. Most require a service fee, varying from $7 to $15 a month, but it should appear on the credit report. A setup fee is usually required, with an upfront cost ($49- $150).
Another route renters can take would be to talk to their landlords, especially if they rent from a large property management firm. Going through the landlord to report the information may not cost anything but could require more work, although some landlords and property management firms already use rent reporting services.
Your credit score could improve once your rent payment history is reported to credit bureaus! Yes, and barring any new negative items – in about two weeks.
Through the Landlord
Nowadays, most landlords report rent payments to credit bureaus—your Landlord may partner with a company that handles those services.
There are three main credit bureaus: Equifax, Experian, and TransUnion. They report your credit score. That said, the bureaus and rent services do not share the information—for example, RentBureau partners with Experian. Esusu and Zingo will partner with Equifax. Zego reports to both Experian and TransUnion.
Therefore, it would be prudent to inquire which service your landlord reports to and when the service will report your rent payments.
Rent Payment Services
Fortunately, several companies offer tenant rent-reporting services if your landlord does not report your payments. They charge monthly subscription fees or initial enrollment fees.
Note that such services may require your landlord to verify your rent payments before including them in your credit report. The credit score calculation may not include rent payment even after incorporation in your report.
Rental Kharma adds your past rental payment history at your current residence to your TransUnion & Equifax credit reports. It promises to increase your average score by 40 points from your rent history and continues to build it into the future.
Also, renters that report two years of history and 1-year ongoing get 100~ point increases on average.
Adds two years of your rent payment history to your TransUnion & Equifax report. It promises to increase your score from 35 to 50 points within the first billing cycle and 100~ in the future.
Tip: If you do not have a rental payment history, it is not advisable to use the service.
Adds two years of your rent payment history to your TransUnion & Equifax reports. The company aims to significantly increase your credit score within 30 days of opting into their service.
Tip: Good for low-budget-conscious consumers who want excellent customer service due to its low ongoing service costs.
This is a free rent reporting service for tenants. However, your landlord must sign up for ClearNow.
They take rent from your checking or savings account and opt for your rental payment data to be sent to Experian. The first report will be after four months’ payment and, after that, monthly.
Tip: Suitable if you do not want to pay enrollment fees.
If you pay your rent online through the PayYourRent portal, you can opt in or out of the rent payment reporting. It reports to all three credit rental bureaus.
Tip: Appropriate for landlords and tenants who do not want to pay subscription fees since it’s free.
Why Not Use a Credit Card to Pay Your Rent?
When it comes to improving credit, look at all your options. Another way to improve your score is to use a credit card to pay your rent. Using a credit card to pay your rent can boost your score as it’s factored into payment history over the length of your credit. As this alone makes up 35% of your score, you’ll be able to see a score improvement. Remember that seeing a positive difference in your score might take some time. It will take time for the bureaus to process this information.
Not sure where you stand in the eyes of credit bureaus or what is even affecting your score? Schedule your complimentary credit audit to find out.
