Getting Credit for Your On-time Rent Payments

For-rent yard sign in front of house Not every adult in America has the same dream of homeownership. Some people feel uncomfortable with the idea of being physically and financially responsible for every aspect of a home. Even when the ultimate goal is purchasing property to call your own, renting may make the most financial sense.

There are ongoing debates about which strategy is better to cover the basic need of housing, but renting can be a smart move when there isn’t yet enough set aside for the down payment, moving expenses, or closing costs. Fortunately, renting now has the potential to help your credit score in addition to being a financially savvy move. Here’s how on-time rent payments may help improve your credit over time.

Rent Payments and Credit Reporting

Up until a few years ago, rent payments were not traditionally reported to the three major credit bureaus – Experian, Equifax, and Transunion. Instead, the only real housing payment details provided to the credit agencies included mortgage payments. Now, however, both landlords and renters recognize the importance of adding rent payment to the credit scoring mix.

Some larger property managers and owners send along the payment details to credit bureaus automatically, each month. When these payments are made on-time or within the grace period (typically ten to 15 days), your credit score calculation improves because of a strong track record of timely payments. If you miss a payment, past the grace period, large property managers may report this as a delinquency on your credit profile.

What has been more frustrating to renters with small property owners or managers is the reality that many do not take the time to report rent payments to the credit agencies. Even if you make your payments on time, you aren’t getting credit for being financially responsible month in and month out. However, several companies designed services for renters and smaller landlords to help with this issue.

Renter Reporting Services

Before checking out some of the services that allow rent payment reporting to the credit bureaus, ask your landlord if he or she already reports. There is no need to do the grunt work if they are already taking care of this for you!

If the answer is no, consider the following:

  • Pinch – This service reports your rent payments directly to the three credit bureaus at no cost. To get started, you connect your bank accounts to the online platform, and then upload a copy of your lease agreement. It’s all automatic from that point.
  • RentTrack – This credit reporting service also provides information about rent payments to the three credit bureaus, but either individual renters or landlords can use the platform. RentTrack collects the rent for you and then sends a check to the landlord, reporting timely payments in the process. RentTrack costs $6.95 per payment, but fees are often less when the landlord is the user.
  • ClearNow – This service links to your checking or savings account and debits your rent from the selected account. Renters do not pay a fee for this, but landlords have to be signed up with the platform in order to receive payments. The service reports rent payments to Experian.
  • PayYourRent – This service charges a fee to users, depending on how rent payments are made, although they may be covered by your landlord. The benefit is that paying through this service means all three credit bureaus receive data regarding your rent payments each month.

Credit Scoring Calculations

Having your rent payments count toward your credit history is beneficial for several reasons, the most notable being the ability to highlight a track record of on-time payment history. Additionally, reporting rent payments helps build a credit profile if you have never had a credit card or loan in the past. The process also helps those who have had credit blunders in the past. Instead of needing to take on new debt to boost your credit score over time, rent payments fulfill this need without opening a new account.

There are many different credit scoring models out there, with nearly all taking into account on-time payments when determining your credit score. However, only the newest versions of FICO and VantageScores evaluate rent payments in their calculations. If you start using one of the services above, or get confirmation that your landlord already reports rent payments to the credit bureaus, do not be surprised if a check to your credit does not reflect this specific credit history. It takes time for the new versions of credit scoring models to be used consistently, so be patient in the process.

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Posted on November 9, 2020 by in Credit Monitoring

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