Although rent reporting isn’t something most landlords do automatically, there are rent reporting services available that can help you build credit.
So if you’re looking to boost your credit score and consistently making rent payments on time, this is a service you may be interested in.
How Rent Payments May Affect Your Credit Score
First, it’s important to know that rent payments don’t impact your credit score like making credit card payments or repaying a loan does.
Paying rent isn’t automatically reported to credit bureaus like Equifax, TransUnion, and Experian RentBureau.
Therefore, making positive rent payments to your landlord won’t usually increase your credit score.
As mentioned, the average landlord won’t automatically report rent payment history because it takes time and costs money.
Using a rent reporting service, however, does allow you to report your rental payment history.
And as long as you’re in the habit of paying your rent on time, this can help improve your credit score.
Note that rent reporting won’t affect your FICO 8 Score, one of the most popular for many lenders. But it should affect your FICO Score 9 and 10 and VantageScore 3.0 and 4.0.
And with an increasing number of lenders adopting these newer models, rental payment reporting will likely have a larger impact in upcoming years.
Some countries like those in the UK have even launched large-scale initiatives, like The Rental Exchange, to streamline the reporting of rent payments to reward tenants for paying on time and to reduce the number of late payments for landlords.
The bottom line is that rent reporters can help improve your credit history by relaying the information to at least one major credit bureau.
How Do Rent Payments Appear on My Credit Report?
Again, if you simply make rent payments on time and don’t use a rental history reporting service, they likely won’t appear on your credit report.
But if you do use a rent reporting service, your payments will appear as an item on your credit report to showcase your rent payment history.
Say, for example, you’ve been a tenant renting an apartment from your landlord for the past 12 months.
If you use a rent reporting service, your payment history will show up on your credit report to indicate the rent payments you’ve made on time during that period.
In this case, it should raise your credit score.
And if you continue to make rent payments on time, along with following other best practices for building credit, it should put you on your way to establishing good credit.
How to Get Your Rent Payments Reported to the Credit Bureaus
One of the top rent reporting services that send information directly to a credit bureau is eCredable, which works similarly to reporting paying utility bills.
Here’s how it works.
First, you upload your lease, which allows us to capture your name, address, lease start date, payment amount due, and payment due date.
Then, you link your checking, credit card, or debit card account (whichever one you use to make rent payments) so we can search for payments that match the amount specified on the lease.
From there, we’ll verify your landlord. If it’s an individual landlord, we simply send them a text message for authentication. Or, if you rent from a Property Management Company, we’ll use Know Your Business (KYB) technology to verify them.
Once that’s completed, we’ll attempt to download up to 24 months of your rent payment history, which costs $14.95 per month.
Then, we’ll report your rent payment history to TransUnion, and it should show up on your credit report within one week.
So in a fairly short period of time, renters can get landlord rental payment data reported and start raising their credit scores.
When compared to other credit-building strategies like reporting a credit card payment or loan payment, renters can improve their credit history considerably quicker.
Does Paying Rent Late Hurt Your Credit?
One other topic to mention is making a late rent payment.
In most cases, being a few days late with a rent payment won’t harm your credit. But if you fall behind by 30 days or more, it can potentially hurt your credit score.
“If your rent goes unpaid for 30 or more days, the landlord or your rent payment service could report the late payment to one or more credit bureaus,” credit expert Ben Luthi of Experian explains.
Further, “if your landlord can’t collect the debt on their own, they may opt to sell it to a collection agency. If this happens, the collection agency will typically report the debt to the credit bureaus.”
As a result, this will likely lower your credit score.
Like making credit card or loan payments, it’s important to always be on time with each rent payment. This is especially true if you choose to use a rent reporting service because failing to pay on time can hurt rather than help your credit score.
Other Ways to Build Credit
Use eCredable for Other Bills
Besides just reporting rent payments, eCredable also lets you build credit by reporting your utility bills.
With it, you can link up to eight utility accounts and report up to 24 months of payment history per account.
So, if you’re currently paying for power, gas, water, Internet, cable TV, satellite TV, and so on, you can leverage these bills to improve your credit history.
If you want to learn more, here’s information on how to add utility bills with eCredable.
Apply for a Secured Credit Card
For those with low credit scores or limited credit history, applying for a secured credit card is one of the best ways to improve a credit profile quickly.
While a secured credit card won’t usually come with as high of a credit limit and tends to have a higher interest rate and fees when compared to an unsecured credit card, it should be easier to get.
As long as you’re responsible with each credit card payment, paying your credit card issuer on time or early, and following best practices like keeping your credit utilization no higher than 30%, this should help you build credit over time.
Pay Off Debt
Paying off debt helps raise credit scores in two main ways.
First, it lowers your credit utilization rate.
As we just mentioned, keeping it under 30% helps increase your creditworthiness, which can make you more attractive to lenders.
Second, it gives you a positive payment history.
According to Investopedia, payment history accounts for 35% of your credit score, which makes paying off debt incredibly beneficial.
And while your debt-to-income ratio doesn’t directly affect your credit score, paying off debt decreases your debt burden and increases your capacity to take on additional credit.
In turn, this too is something many lenders will keep in mind when applying for future credit accounts.
Make Payments On Time Each Month
This may sound like common sense, but again, 35% of your credit score is determined by payment history.
One of the quickest ways to have bad credit is to be delinquent with payments.
Conversely, one of the best ways to achieve a good credit score is to consistently pay rent to your landlord and your credit bills on time.
And if you can pay in advance, even better.
Let’s Recap
The short answer to the question, “Does paying rent build credit?” is no.
By itself, renters can’t usually improve their credit scores with a positive rent history alone.
However, using rent reporting services definitely can, as long as you consistently make rent payments on time and they report to a landlord credit bureau.
So if you’re a tenant and looking for a simple way to build credit, rent reporting services are definitely something to consider.
And you can use the positive momentum you gain to unlock other credit opportunities, leverage better terms and interest rates, increase your credit limit, get the best credit cards, and more.