Most credit experts agree that making on-time payments is one of, if not, the best ways to improve one’s credit score. And its only natural, considering that your history of making payments- or not- accounts for 35% of your credit score.
However, upon reviewing your credit reports, you might be surprised that your history of making on-time rent payments isn't listed anywhere. Well, that is because, usually, rent payments are not reported to the credit reporting agencies- Experian, Equifax, and TransUnion- automatically.
But that does not mean there is no way for you to use your rental history to improve your credit scores, as well as how creditors and lenders view you as a borrower. There are steps you can take to get your monthly rent payments onto your credit reports and improve your credit scores in the process.
What Is A Credit Score?
A credit score is a three-digit numerical expression that, arguably, best represents the creditworthiness of a borrower, which makes it one of the most important numbers in any one’s financial life.
Credit scores, which typically range from 300 to 850, are calculated by using the various information presented in an individual’s credit report. This three-digit financial number lets creditors and lenders know of the potential credit risk involved when conducting business with a prospective borrower.
The general rule of thumb for creditors and lenders: the higher your credit score is, the more creditworthy you are, and the more reliable you are to pay back a debt. In reverse, the lower your credit score is, the more credit-risk you pose potentially, and the more likely you are to default on a loan.
While there are many different credit scoring models and credit scores, for creditors and lenders, the most common and widely used for lending decision making is the FICO credit score.
For FICO credit scores, five major factors are considered in the calculation, which are:
- Payment History (35%)
- Credit Utilization (30%)
- Length of Credit History (15%)
- Credit Mix (10%)
- New Credit (10%)
How To Get Your Rental History On Your Credit Report
In FICO credit scores, as well as other credit scoring models like VantageScore, Payment History is by far the most weighty. Meaning, your history of on-time payments can hugely impact how your credit score looks like.
However, usually, landlords and property management companies do not report your rent payments to the credit reporting agencies on their own. Why? Well, that is because landlords and property management companies aren't considered creditors. Meaning, they are in no obligation to automatically report your payment history to the credit reporting agencies.
Meaning, if you want your history of making on-time rent payments to be included in your credit report, as well as potentially improve your credit score, you will need to take action yourself, if you want to make this happen.
Here’s what you can do:
Contact Your Landlord
It’s not all that difficult really. Ask your landlord or property management company if they are willing and able to report your rental payment history directly to the credit reporting agencies, or at least of the three major ones- Experian, Equifax, and TransUnion.
If they agree, your lease will usually appear in the "accounts" section of your credit report. This will include the date the lease started, your monthly payment amount, and your payment history- regardless of whether they were made on time or not- for the past 25 months.
Enroll In A Third-Party Service
If your landlord or property management company does not, will not, or cannot report your rental history to the credit reporting agencies, you may consider signing up with a fee-based rent payment service that reports to the credit reporting agencies upon request.
Third-Party companies such as RentTrack, PayYourRent, eRentPayment, PayLease, Cozy, and ClearNow collects and disburses rental payments, and give subscribers of the service the option to for their rental history to be reported to the credit reporting agencies.
Does Paying Rent On-Time Improve Credit Scores?
The short answer is: YES- as long as they are included in your credit report. While landlords and property management companies are not obligated and required to report your payments to the credit reporting agencies, usually they would be happy to do so upon your request.
Your Payment history is the weightiest scoring factor for FICO credit scores, as well as in the VantageScore model, so the more evidence that you have been paying your bills on time, the better for your credit.
Your credit score plays an important role in your life — affecting the purchases you make and so much more. A positive history of making payments on time is vital in enabling you to obtain valuable credit services such as credit cards, mortgages, and auto loans.
As mentioned before, creditors and lenders use credit reports and credit scores to gauge the likelihood that you will pay back a loan. Do understand, however, only the newest versions of the FICO credit scoring model consider rental data, and some lenders still use older versions.
But, for the most current credit scoring models that do take your rental history into consideration, your on-time rental payments can give your credit scores that much-needed boost- especially if your credit has been damaged in the past or is still currently young.
The Bottom Line
If you are trying to establish or repair your creditworthiness, getting credit for all your responsible financial actions and behaviors makes perfect sense. When your credit reports are filled with positive information, you might appear more attractive as a tenant and as a borrower.
However, even if you do manage to get your rental history included in your credit report, inaccurate or incomplete items on it can hurt your credit score. Let us do the dirty work of getting those negative items corrected or removed. Call us at 888-799-7267 to schedule a Free Credit Consultation.
Set up a Free Credit Consultation to start your credit repair journey (just fill-up & submit the form below):
If you want to see more informative articles like this one, visit: