As we move forward in our adult lives, we eventually learn the importance of having a good credit score. A good score reflects adult financial responsibility. “Good credit” usually refers to a score that is about 700 or higher. With a favorable score, borrowers can qualify for loans, the best credit card deals, and the best mortgage rates. It may also help in landing a good job and scoring more favorable terms on phone bills.
Having a subprime score, on the other hand, can lead to high-interest rates and often require a much larger downpayment with a lower chance of approval. Having a low score can be the result of a number of different factors that influence ratings – it is important to educate yourself on how scores are calculated. There are, however, many ways of building – or rebuilding – credit. Other than making use of 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 are able to receive it. This data goes into your credit report, therefore improving your score. The trick here is to make sure that the credit bureaus receive the information, otherwise, it won’t have any impact on your score.
Rent payment information is not automatically gathered by credit bureaus. This is because rental payments are considered non-traditional credit tradelines. As they are non-traditional, creditors are not required to report them to bureaus. To get this information reported, the simplest, or no-hassle, way is to make use of a rent reporting service. Most require a service fee, which can vary from $7 to $15 a month, but it should show up on the credit report. There is usually a setup fee required, which is 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 hoops to jump through although some landlords and property management firms make use of rent reporting services.
Once your rent payment history starts getting reported to credit bureaus, your credit score could begin improving – barring any new negative items – in as little as two weeks.
Through the Landlord
Nowadays, most landlords report rent payments to credit bureaus by collaborating with partners that handle those services.
There are 3 main credit bureaus Equifax, Experian, and TransUnion that report your credit score. That said, the bureaus and rent services do not share the information with each other.
For example, RentBureau partners with Experian, Esusu and Zingo partner with Equifax while Zego reports to both Experian and TransUnion.
Therefore, it would be prudent to inquire if, and which service, your landlord reports to and if they are timely when reporting your rent payments.
Rent Payment Services
Fortunately, if your landlord does not report your payments, there are several companies that offer rent-reporting services on behalf of tenants. They charge monthly subscription fees and/or initial enrollment fees.
Note that such services may need your landlord to verify your rent payments to them before including them in your credit report. Rent payment may not be included in the credit score calculation even after incorporation in your report.
Popular rent reporting services include:
Adds your past rental payment history at your current residence to your TransUnion & Equifax credit reports. It promises an increase to your average score by 40 points from your rent history, plus it continues to build it into the future.
Also, renters that report 2 years of history and 1-year ongoing get 100~ point increases on average.
Adds 2 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 2 years of your rent payment history to your TransUnion & Equifax reports. The company aims to ensure a significant increase in 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.
4. Esusu Rent
Adds 2 years of your rent payment history to your TransUnion, Experian, and Equifax.
Unlike the services above, it does not have a spousal discount and only works with renters who live in a building that uses Esusu.
Tip: Best if you want a listing in all the 3 major credit bureaus.
5. Clear Now
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 4 months’ payment and thereafter 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 the 3 credit rental bureaus.
Tip: Appropriate for both landlords and tenants who do not want to pay subscription fees since it’s free for all.
Why Not Use a Credit Card to Pay Your Rent?
When it comes to improving credit, make sure to look at all your options. One of the other ways of improving 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. Keep in mind that it might take some time for you to see a positive difference in your score. It will take time for the bureaus to process this information (and it might not reflect positively at first).
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.