If you pay rent for a home, condo, or apartment, typically that’s your biggest expense every month. But up until recently, you didn’t get credit on your credit report for being on time with your rent payment each month. In fact, the only time you saw rent payments on a credit report is when you were late. To get this boost to your credit score with your rent payments, you have to be proactive. In this article, I’m going to share how to build credit by paying rent.
A New Trend of Reporting Rent Payments on Credit Reports
In the last couple of years, the concept of accepting monthly rental payments and placing them on consumer credit reports was accepted by Transunion, one of the 3 big credit reporting agencies. Recently, Equifax has also agreed to start accepting rental payments as well. Experian, because they want to sell you their own product for rent reporting is not playing well with others. You must pay Experian directly to get your rent reported on their credit report.
How Do Accounts Get on Your Credit Reports?
To understand how you can get your rent reported to Transunion and Equifax, you must first know how any item gets reported to the credit bureaus. One of the ways the credit bureaus make money is by charging creditors for allowing them to place your account information on one, two, or all three of the credit reporting agency credit reports. The reason why creditors will pay to have your on-time payments placed on your credit report is so they can also ding you with a negative report should you be late or not pay at all. Credit reporting is your report card that will either reflect good or not so good payment history, among other aspects of your credit history.
To Get Your Rent Payments Reported You Must Be Proactive
Landlords and property management companies, however, are not inclined to pay credit bureaus every month for all their tenants. But they will pay for tenants that are late hoping that it will help them recover the delinquent amount. That to them seems like a good investment.
So, to get your on-time monthly payments added to your credit report and therefore, build credit by paying rent, you have to work with a service outside of your landlord to get that accomplished. Several services have popped up to take advantage of the huge market for this.
Build Credit by Paying Rent
We have a service that does exactly what we’re talking about. For the last couple of years, we have been reporting rent to Transunion for our clients and have sometimes seen increases of 30 to 50 points on their Transunion credit reports.
How Much Will Your Credit Score Increase?
Keep in mind, that the amount of increase in a credit score by adding one factor (rent reporting as an example) is dependent on everything else that is reflected in your credit report. Items such as on-time payments for other accounts, the length of your credit history, the mix of the type of credit accounts that you have, and the amount of debt you carry are factors in calculating credit score increase. People that have everything else in good standing are going to see a higher increase than those that do not.
Now Reporting to Equifax
We are now adding Equifax to our service. Equifax requires access to the consumer's monthly bank statements to electronically check to see if a monthly rent payment is made. The positive to this is that landlord needs not to be contacted every month to verify the payment.
With our service, you can start next month forward. Or, you can go back and have the last 12 months reported. You can even have the last 24 months reported. By having previous payments reported you can add to your credit history as well. Credit history makes up 15% of your overall credit score and can really help boost your score.