If you have a positive rental payment history, rental tradelines can help boost your credit score.
Note, however, that rent reporting isn’t something most landlords do automatically.
To leverage rental tradelines, you’ll need to use a rent reporting service like eCredable.
If this is something you’re interested in, read on.
What is a Rental Tradeline?
Simply put, a rental tradeline is an item on your credit report that displays your rent payment history.
If, for example, you’ve been renting an apartment for the last year, a rental tradeline would reflect the rent payments you made during that 12-month period.
For a renter, the main purpose of this type of tradeline is to leverage rent payments to help establish a positive credit history, which is similar to paying utility bills and building credit by reporting them.
This makes it particularly appealing to those with a limited credit history or low credit score. Assuming you consistently make rent payments on time and never make a late payment, rent reporting can improve your credit file.
In turn, this can make you more attractive to lenders and potentially help you negotiate a future credit account with better terms, a higher credit limit, or an unsecured credit card rather than a secured credit card.
And for a landlord or property manager, rental tradeline reporting can be beneficial because having a tenant opt-in to report their rental payment data increases the likelihood that they’ll make rental payments on time.
The bottom line is if you’re looking to improve your credit score, rent a property, and are in the habit of being punctual with your rent payments, a rental tradeline can be advantageous.
Difference Between Rental Tradelines and Financial Tradelines
The main difference is that rental tradelines exclusively represent activity involving rent payments, while financial tradelines are broader and apply to credit accounts that are reported to a major credit bureau.
Some examples can include a credit card, student loan, auto loan, and mortgage.
Besides that, there are three other key differences.
Rental Tradelines Don’t Affect Your Credit Utilization
Credit utilization ratio is the percentage of credit being used divided by the total amount available.
For instance, if you had $5,000 of available credit and used $1,000 of it, you would have a credit utilization ratio of 20%.
With revolving financial tradeline accounts, such as a credit card or a line of credit, credit utilization is a major factor in determining your credit score.
In fact, it is worth 30% of your credit score.
But rental tradelines are different because they don’t affect your credit utilization.
Therefore, they don’t impact the “amounts owed” part of your credit score and won’t be a factor during a credit check.
FICO 8 Scores Aren’t Affected By Rental Tradelines
Unfortunately, one area where rental tradelines don’t have any impact when compared to financial tradelines is with FICO 8 Scores.
The FICO 8 algorithm doesn’t factor rental tradelines in, meaning a positive rent payment history won’t affect the most popular score among today’s lenders.
However, rental tradelines do affect new credit scoring models, including FICO Score 9 and 10, as well as VantageScore 3.0 and 4.0.
Also, note that a growing number of lenders are using these newer models, and this is a trend that’s only going to continue. And as time goes on, rental tradelines should have a bigger impact.
Do Rental Tradelines Work?
Now for the big question. Are rental tradelines truly helpful, and can they help raise your credit score?
The short answer is yes.
There’s no doubt that rental tradelines can boost your credit score, provided you consistently make your rent payments on time.
As we just mentioned, rent reporting to credit bureaus can increase your FICO Score 9 and 10 and VantageScore 3.0 and 4.0.
To quantify, the property management automation platform, Zego, states that “studies show residents who opt-in to report rent payments to credit bureaus, see their credit scores increase by an average of 29 points after just two months.”
Results vary, of course, but this data provides insight into how beneficial rent reporting can be.
That said, lenders don’t always like them, and rental tradelines won’t have the same level of impact as many other financial tradelines.
But on the whole, rental tradelines give you a chance to demonstrate your financial responsibility as a tenant and can be an asset in building your credit profile.
If you have little or no credit, this can be a great way to gain momentum and, in time, achieve a good credit score.
It’s also worth noting that there’s been a push in the past two years by both Fannie Mae and Freddie Mac to increase their Financial Inclusion efforts.
One particular way this is being done is by allowing underwriters to interact directly with mortgage applicants to link their checking accounts to see the presence of rental payments. By doing so, this should help increase the number of overall approved mortgages.
How Can I Get a Rental Tradeline?
The first thing to know is that rental payments aren’t automatically reported to a landlord credit bureau.
It’s not something most landlords do because 1) it costs them money and 2) rent history reporting is an additional task that takes time.
Therefore, it’s not a common practice and not something the average renter can currently take advantage of.
So in order to get a rental tradeline and use it for credit reporting, you’ll need to use a rent reporting service.
Note that most rent reporters come at a cost. But when you consider how it can boost your credit score and put you on your way to establishing good credit, it’s usually well worth it.
As for specific solutions, there are several options available, with one of the best being eCredable.
Report Your Rent with eCredable
In addition to reporting utility payments, eCredable now offers rental tradelines that are reported directly to credit bureaus.
So if you’d like to start reporting your rental payments, you can do it with eCredable.
To get set up, you’ll need to first upload your lease so we can capture your name, address, lease start date, payment amount due, and payment due date.
Then, after linking your payment account (checking account, credit card account, or debit card account), we can search for payments that match the amount specific to the lease.
If you rent from a Property Management Company (PMC), we verify the PMC to make sure they’re legit. Or, if you rent from an Individual Landlord (ILL), we’ll text your landlord to authenticate their identify.
Once that’s been done, we’ll attempt to download up to 24 months of rent reporting data (something similar to seasoned tradelines), and it should show up on your credit report in less than one week.
From there, we’ll continue to report each rent payment that you make to your housing provider moving forward, and they’ll appear on your TransUnion credit report. (This will also be reported to Equifax and Experian in the future).
This works similarly to when you add utility bills to your credit report with eCredable.
Wrapping Up
If you’re looking to bolster your credit report, rental tradelines can offer some tremendous benefits.
It’s just a matter of using a reliable rent reporting service and making rent payments on time.
Do that consistently, and reporting your rental payment information should be able to improve your credit history.