All the three major credit bureaus in America accept rent payment as part of your credit history. These rent payments can be included in your credit history but not by you or your landlord. They have to be reported to Credit Reference Bureaus by third-party organizations known as Rent Payment Reporting Services. The landlord would also have to report it to a Rent Payment Reporting Service for onwards reporting to the bureau.
Why Report your Rent Payment History?
The importance of a good credit rating is impossible to overstate. The clutch that a poor credit score puts on your finances and business prospects requires you to do everything in your power to rectify the situation. You can improve the credit rating is to ensure you get every on-time payment you make on your credit report.
Rent is one of the primary bills you must pay, and most people prioritize it. Failure to prioritize would, of course, leave you homeless. No matter which other bills you have failed to pay, rent may be the one bill you have been paying on time. This is why you need to put it in your credit report.
Besides repairing your credit rating, you may want your rent payment included in your credit history if you are one of the credit-invisible people out there. Being credit invisible means that none of your payments are on record. There are instances where being invisible is worse for your prospects than a bad credit rating.
The Acceptability of Rent by Credit Bureaus
All three major credit reference bureaus accept information on rent payment as relevant to credit rating. Some of the credit bureaus have divisions that are dedicated to receiving rent-related data. Experian, for example, has a division known as Experian RentBureau.
Your concerns for the acceptability of rent data shouldn’t be focused on whether the bureau accepts rent payment data into a credit report. You should be more concerned about which Credit Bureau accepts information from the Rent Payment Reporting Service you use.
There are several Rent Payment Reporting Services in the market today.
- Rental Kharma
- Rent Track
- pay your rent and
RentTrack, cozy, PayYourRent, Rentler, ClearNow, and eRentPayment are allowed to report to Experian, but the others are not. This means that if you want your good rent payment record to appear on your Experian credit report, you have to choose the accepted payment services. If you use RentalKharma, for example, it will only report your rental payment history to TransUnion. Ensure you use a service that can report to the three main credit bureaus for maximum impact.
There are two ways to join a rental reporting service. One of them is registering directly into a rent payment service. These services usually have registration forms online. You log in and register.
Some of the information you may be required to provide include your details and a copy of your lease agreement. Some rent payment services don’t allow you to report your past payment history. Therefore, if you want to leverage your past rent payments to boost your history, ensure you pick a service that allows it. State whether you want to report your past rent payment history during registration because you can’t include this option later.
You need to upload your lease agreement means that the lease must be in your name. People who sublet property can’t register, and they, therefore, can’t have their rent history captured.
You can also register through your property management company if it offers the option. When you enroll through the company, it handles administrative issues, such as uploading the relevant documents. These management companies will typically have a button on their website enabling you to opt-in.
Sometimes, reporting your rent history into your credit history isn’t free. It may require you to pay monthly or annually at a rate determined by the rent service through which you report. You have to decide whether the cost of reporting is tenable for you or not. The cost of credit for a person with a low credit rating is relatively high, and it may offset any cost you incur as you report your rent payment history.
A survey conducted by TransUnion showed that credit-invisible people who reported their rent payment gained 635 points on average. Those with a prime credit score gained 4 points on their credit rating, while those with a sub-prime gained 13 points. These gains are only available to the people who pay their rent on time at all times. You shouldn’t include your rental payment into your credit rating if it is not impeccable.
There are some perils associated with reporting your rent payment. One of the dangers stems from the fact that the data you upload is reported within 24 hours of reporting. This is unlike other forms of relevant credit data that can be updated anywhere between 30 and 90 days of reporting. Late rental payment will have an immediate negative effect on your credit rating.
There is also the possibility of your credit rating reducing when you start reporting your rent payment, even when your payment record has been perfect. This is because your rental payment report falls under the ‘tradelines’ category. A new reporting in this category leads to an initial drop in your credit rating, and reporting your rent may have the same effect. The level of the drop depends on the credit bureau reporting. In Experian, a new tradeline determines 10% of the credit rating, 5% in TransUnion. You can quickly recover any drop in your credit report occasioned by your initial reportage of rent payments and your rating enhanced.
Overall, the credit-invisible and people and those with poor credit ratings benefit more from reporting healthy rent payments. People with good credit ratings may not benefit as much as those with lower ratings in terms of points, but they gain from a more diversified credit report.
Angela Kovacs of Van Buren Township, Michigan is the founder and CEO of Credit Repair Gal. A credit restoration firm in Michigan.