Is your credit score struggling? It may be because of poor credit decisions in the past or simply because you don’t have enough credit. This happens often with renters. Without a mortgage, there’s no housing tradeline reporting to the credit bureaus and housing trade lines often help improve your credit score (if paid on time).
Did you know that you may be able to have your rent reported to the credit bureaus too? Before you do, make sure you know the importance of paying your rent on time. If you don't know your credit score, it's free and easy to find out what it is.
You Can Build Credit
If you are a renter with little credit history, you may think you’ll be stuck renting forever. Without a housing tradeline or many credit cards, there isn’t much of a credit history for the bureaus to score. If you report your rent to the credit bureaus, though, you start to build a credit history, which helps you build a credit score. The longer your credit history is, the more it helps your credit score increase.
Timely Payments Help Build Your Credit Score
One of the largest portions of your credit score is the payment history. In other words, do you pay your bills on time? Any payment made 30 days late reports to the credit bureaus as a late payment. This brings your credit score down, since 35% of your credit score is the payment history. On the other hand, timely rent payments can show a history of on-time payments, which helps increase your credit score quite a bit.
Late Housing Payments can Hurt You
It’s important to realize what late rent payments can do to you. Not only do you run the chance of eviction, but you also run the risk of not being able to rent in the future. If you think you might buy a home in the next few years, you could ruin those chances as well. Future landlords and lenders take housing payments seriously and they look closely at your history to see your patterns.
Getting Your Rent Payments on Your Credit Report
Here’s the tricky part. Most landlords don’t report rent payments to the credit bureaus. They don’t have the time or don’t want to spend the money. If you want your rent payments to report to the credit bureaus, you may need the help of a rent reporting service. There are a few free options, like Esusu and Zingo, but many require an enrollment or subscription fee. These include Rent Reporters, Credit My Rent, LevelCredit, Rock The Score, and Rental Kharma.
These services will contact your landlord monthly to check on the status of your rent payment. They then report the payments to TransUnion Equifax and Experian. You then have new trade lines on your credit report helping you build a credit history and increase your credit score with your on-time rent payments.
Customers of these services may see an increase in their credit score of 40 points or more, although your exact results may be higher or lower.