Need a Credit Boost? Consider Rent Reporting 

Does paying rent build credit? In terms of what affects your credit score, you are likely already aware that staying on top of recurring payments, paying down debt, and having some credit diversifications are all important factors in building and maintaining good credit health. But did you know that you can also use rent payments to give yourself a credit boost?

There are currently more than 40 million people in America paying rent; if you’re one of them—and you have a history that reflects timely payments—why not use this to your advantage? 

Credit has a real impact on your financial life—whether you’re purchasing a car or home or simply applying for a new credit card. Your score creates a financial snapshot for prospective lenders that determines not only your ability to pay but also whether you’ll receive favorable rates and term conditions.

While it may not be the best way to build credit on its own, positive rental report history can be helpful for those who don’t have much credit history (and would like to build more) and by those who have dealt with credit hurdles in the past and are motivated to give themselves a leg up.

The folks over at Fannie Mae launched the Multifamily Positive Rent Payment Reporting initiative this past September with the goal of bolstering equitable access to credit and removing obstacles along the journey towards sustainable housing.

Timely rent payments often don’t make the cut when it comes to what lands on your credit report, and this puts many renters at a disadvantage; especially black and Latino/Hispanic consumers who are disproportionately represented within the 20% of Americans with little to no established credit history.

“The absence of sufficient credit history reduces a renter’s ability to access housing in higher-opportunity neighborhoods, obtain a mortgage, and attain lower-cost credit, such as auto loans and education financing. By enabling easier and more expansive adoption of positive rent payment reporting, we can knock down this longstanding barrier to building credit and help more consumers begin to establish a strong financial and credit foundation,” says Michele Evans, Executive Vice President and Head of Multifamily at Fannie Mae.

While you may have sufficient proof of past rent payments, the major credit bureaus (Experian, TransUnion, and Equifax) won’t accept a report from you directly—it must come from a rent reporting service.

The Fair Credit Reporting Act is a federal law designed to protect your information while allowing you to dispute any incorrect data. Rent reporting services must abide FCRA requirements and most rent reporting services do charge a monthly or yearly subscription fee. Some companies also require a one-time setup fee.

You have the option to either choose a rent reporting service independently (whereby you enroll and pay the fee directly) or ask your landlord or property manager to sign up (in which case you don’t pay directly, but your landlord may expect you to cover any cost they incur.)

Larger complexes with multiple units may have a preferred rent reporting service that they use already so it’s wise to inquire before you dive into researching which service is the best fit for you.

If your landlord doesn’t already have a preferred rent reporting service they use, here are several suggested questions you can use as a guide in steering your research:

• What are the total costs?
• What is the service’s reputation
• How easy is it to use?
• Which major credit bureaus receive the report?
• Are past payments reported?
• Can I add a roommate or spouse?
• How soon will the information appear on my credit report?
• How is my data protected?
• How easy is cancellation?

It’s worth noting that landlords and property managers with Fannie Mae – financed buildings can participate in the aforementioned Positive Rent Payment program. Rent payments are reported through Esusu, Jetty, and Rent Dynamics, and all three vendors can be contacted through Fannie Mae (scroll to the bottom for an at-a-glance comparison.)

Beyond these three rent reporting companies, FinMasters recently created a handy comparison of several established vendors (including Credit Rent Boost, Rent Reporters, LevelCredit, and Boom) which allows for quick referencing of costs as well as who receives the report.

A word of advice: if you land on two or three comparable options, opt for the vendor who lists more than one major credit bureau. The more credit bureaus a service reports to, the more positive credit impact you receive.

A recent study by Experian revealed that roughly 75% of participants who chose to include rental payments as part of their credit report saw their credit scores improve between 11 and 29 points. The takeaway? Regardless of which rent reporting service you decide to go with, it’s a great—and too often overlooked—way to establish and build credit.

If you’re struggling to stay on top of rent payments, our certified HUD counselors at 995Hope are ready to offer support. Housing Counseling can help you manage unexpected circumstances, including lost or reduced monthly income that’s impacting your ability to pay rent. Calls are completely confidential and pressure-free. Contact 995Hope and we’ll help you make a plan.