Reporting your on-time rent payments to credit bureaus can improve your credit score.
Making timely payments on your mortgage will help keep your credit score higher, but what if you rent your home? It turns out that rent payments are rarely reported to the credit bureaus, which means they have no impact on your credit score – that is unless you fail to pay.
It seems unfair that you run the risk of ruining your credit score as a renter if you don't pay, but aren't eligible for the benefits if you do.
Fortunately, you may be able to have your rent payment history reported to the credit bureaus too, but it doesn't happen automatically – you need to make it happen.
You Can Build Credit
If you report your rent to the credit bureaus, you will 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 factors used to calculate your credit score is payment history – essentially, whether or not you pay your bills on time. Any payment made 30 days late reports to the credit bureaus as a late payment. Late payments will bring 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 essential to understand 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. Others may require an enrollment or subscription fee, such as Rent Reporters and LevelCredit.
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 tradelines 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.
The bottom line: if you don't have much credit history or your score could use a lift; you should consider utilizing one of these services if you are renting your home and want to keep your credit score in top shape.