It’s one of the many dilemmas recent college graduates face: You need tools such as credit cards to build good credit, but can’t get these credit building tools without first having good credit. Even more frustrating, you’re funneling off a huge portion of your income towards rent payments every month with nothing to show for it.
For such a large monthly expense, you may find yourself asking the question: “Does rent affect credit score?”
Property management companies often conduct credit checks when screening apartment applicants. So why shouldn’t on-time rent count once you’ve moved in? Fortunately, it is possible for those monthly rent payments to contribute to your credit history, just like a credit card or loan would.
Keep reading to find out how to properly build credit by paying rent.
How does rent affect credit score and history?
Each of the major credit bureaus will list rental payment history to your credit report. Experian was the first on board five years ago, followed by Equifax and TransUnion in 2014.
But this is where it gets tricky. All three credit bureaus may accept rental payments, but not for all of the credit scoring criteria the bureaus endorse. The lesser-used VantageScore includes rental history in its scoring model, meaning that your three-digit number will improve with timely, consistent rent.
As for the more visible FICO score, rental payments don’t count towards building your credit, yet two other FICO-based scoring models, the FICO 9 and FICO XD, do acknowledge rental payments.
That’s not to say that you should pass on getting your rent reported, since many future lenders and creditors you might want to work with will use a cross section of credit scores — VantageScore, FICO, and otherwise — to determine your creditworthiness. And your rental payments should absolutely be part of it.
How to build credit with rent
Getting your rent reported to the bureaus isn’t as easy as calling up TransUnion yourself. You’ll need to have your payments logged with one of numerous rent reporting agencies, who will turn the information over to the credit bureaus.
Certain agencies require your landlord to opt in. If they’re not acquainted with reporting payments, don’t hesitate to ask them. If they seem the reluctant type, remind them that you’ve been a good tenant and on time with your rent payments.
It may also help to provide them with a list of some rent reporting websites they could work with. Some will even facilitate payments between you and your landlord. If you reach an impasse with your landlord, there are some services listed below which enable you to pay and self-report your own rent.
Try some of these rent reporting agencies on for size and start using your rent to your credit’s advantage:
- Rental Kharma reports rent payments straight to TransUnion and gives renters the option of adding the last 24 months of payments to their credit reports. Setup is a nominal $40 verification fee, with $10 for each subsequent month.
- Rent Reporters will also retroactively report rent going back two years. Members are allowed a 15-day free trial, and signing up is free. Electronic payments carry a processing fee under $4, and debit/credit card payments tack on a 2.95% charge.
- PayLease works through Experian’s RentBureau, as does PayYourRent, which also sends your rental info to TransUnion. For PayYourRent, credit reporting is free; residents can also pay their rent online or through the site’s mobile app.
- With RentTrack, monthly rent payments are reported to TransUnion, Experian, and Equifax — a good choice if credit building is a priority. RentTrack only charges $1.95 per month, but the cool thing about this service is that you can pay your rent online and view your updated credit score and monitor your rent reporting.
- Payment Reporting Builds Credit isn’t affiliated with the big three credit bureaus, however, PRBC has its own credit scoring algorithm that your rental payments apply towards. For a free service, it’s worth adding it to your rental reporting/credit building portfolio.
- RentPayment is named for exactly what it does: a free service that allows you to report your rent each month to TransUnion and build your credit. There’s also a mobile option, as well.
Own — don’t rent — your credit
As with any service, read the fine print and look at the particulars of any given agreement before you sign up — even the free ones.
Confirm how a rental reporting agency will protect your personal information, verify which credit bureau your rent will be reported to, and how long it will take to appear on your report. Remember that the VantageScore is the model where your rent will reflect most prominently.
Rental payment reporting isn’t without some skeptics who believe that tenants may hesitate exercising certain rights, like withholding their rent if an unruly landlord refuses to make repairs, out of fear that they’ll be reported late to the credit bureaus.
Despite that, make sure you take ownership of your credit, payment reporting or not. Follow these best practices:
Pay on time and in full: Just like a credit card or loan payment, always pay your rent on time (the earlier, the better). If you can afford it, paying one or two months ahead of time makes a good impression, too.
Stay on budget: You have to be able to afford your rent in order to make on-time payments. According to the 50/30/20 budget rule, no more than 50 percent of your monthly take-home pay should include housing expenses … and if your rent takes up the full 50 percent, you may be paying too much.
With student loans and other essential expenses, seek out an affordable apartment first, and report your rent second, to keep your credit healthy.
Try out other credit builders: Your student loans count as one expense reflected in your credit score. Your rent may count as another. What are some other options?
Even if you don’t qualify for a regular credit card, try a secured card, which is designed to help those with bad or no credit build up a solid credit history. You can also check out our other recommended credit building tools to find something that works for you.
Now that you know the answer to “Does rent affect credit score?” your credit history can become strong enough to open up new doors for you. Going from leasing and renting to buying and owning will be because you took the steps to build your credit history when it mattered most.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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