Should You Add Your Rental History to Your Credit Report?
The following is presented for informational purposes only and is not intended as credit repair.
Your credit score is a crucial part of your overall financial health. A strong score makes it easier to access loans and additional credit at desirable terms.
But to build strong credit you also need to use credit…and that can be tricky, especially when you’re first starting out. It can be difficult to show that you’re creditworthy when you have no credit history, which can put otherwise responsible borrowers at a disadvantage.
One solution that’s started to gain popularity recently is rent reporting, which adds your monthly rent payment history to your credit report and becomes a factor in your credit score. For someone who hasn’t used much credit, but has successfully paid their rent on time each month, this could be a great way to boost your score. But is it right for you? Here’s what you need to know.
Why haven’t we been reporting rent all along?
If you own a home and have a mortgage, that particular housing payment can have a significant impact on your credit score. So it might stand to reason that your rent history should play a similar role.
However, there’s effort and usually some expense involved with reporting account activity to the credit bureaus. You may be surprised to know that no one is actually required to report your account activity to the credit bureaus, including creditors and lenders. So while landlords certainly can make a monthly report, historically there hasn’t been enough of an incentive for the practice to become widespread.
How would a rent report change my score?
It’s hard to say exactly how much you might benefit from including your rental payment history in your credit report. Goldman Sachs recently completed a pilot program that focused on residents in an affordable housing program. Participants in the pilot saw their scores increase by an average of 42 points, which is a significant gain, though the sample size of the program was small, with 32 residents participating.
Many of the available rent reporting services out there will add the previous two years’ worth of rental payment to your history, providing a quick boost to your score (presuming your rental history is positive and they’re able to confirm that history with your landlord).
Under the right circumstances, adding your rental history to your credit report could potentially boost your score – especially if the rest of your credit history is fairly vacant.
How do you add rent reporting?
It’s possible your landlord already makes reports to the credit bureaus. As the concept gains popularity as a selling point in a competitive housing market, you may see more landlords offering rent reporting as an incentive to prospective residents.
In the meanwhile, if you want rent reporting and your landlord doesn’t offer it, you’ll have to pay for it yourself.
That’s right – you’ll very likely need to pay a fee to have your rental payment history sent to the credit reporting bureaus. The size of the fee and how often you need to pay it will vary depending on which service you use.
And there are a lot of options. From Experian RentBureau to Rental Kharma to Rock the Score and beyond, you have plenty of options. Your best bet is to talk to your landlord first to see if they use (or are planning to use) a rent reporting service. After that you’ll want to research your options and pick the service that best suits your needs. Just be sure you understand what the service costs, how it works, and how easy it is to cancel.
You’ll also want to confirm whether or not your information is being reported to all three major credit bureaus. Some may only report to one bureau.
Will rent reporting help you?
Ultimately, the choice to use a rent reporting service comes down to cost versus benefit. If you need to build strong credit quickly (perhaps because you want to stop renting and buy a home soon), then the cost of rent reporting may be outweighed by the long-term savings you’ll get by having strong credit when you start looking for a home.
On the other hand, if you don’t have any major purchases on the horizon, you may be just fine building credit slowly through credit cards and other, more traditional means.
If you have questions about your credit history and want to learn more about how strong credit is built, consider connecting with one of MMI’s trained credit counselors for a one-on-one credit report review.