Is Credit Score Affected By Rental Payment History?

In general, rental payment history does not directly affect your credit score because rent payments are typically not reported to the credit bureaus (Equifax, Experian, and TransUnion). However, there are ways rental payments can influence your credit score, and steps you can take to have your rent payments considered as part of your credit history.

How Rental Payment History Affects Credit Scores:

1. Traditional Credit Reporting:

   Rent payments are not automatically included in traditional credit reports. Unlike credit card or loan payments, which are reported to the credit bureaus by lenders and creditors, rent payments are usually not shared with the bureaus unless there is a significant issue, such as late payments or non-payment, which may be sent to collections.

   As a result, consistent on-time rent payments typically do not impact your credit score. However, missed payments or rent-related issues could negatively impact your credit score if reported to the bureaus by a collection agency.

2. Late Rent Payments and Collections:

   If you fail to pay rent and the landlord reports the debt to a collection agency, this collection account could show up on your credit report, potentially lowering your credit score.

   The impact of this would depend on factors such as the amount of the debt, how long it’s been outstanding, and whether it’s been resolved. A late or missed rent payment that goes to collections could have a significant negative impact on your score.

3. Inclusion of Rent Payments in Credit Reports:

   Although rent payments are not automatically reported to credit bureaus, there are ways to have positive rental payment history included in your credit report. Some services allow tenants to opt-in to have their rental payments reported to credit bureaus, which can help improve their credit score.

How Rent Payments Can Be Factored Into Your Credit Score:

1. Rent Reporting Services:

   Third-Party Services: Companies like RentTrack, RentReporters, and Experian RentBureau offer services that allow renters to report their rent payments directly to the credit bureaus. These services usually require landlords to cooperate by submitting the rent payment information, or the renter may be able to submit their own payment records if they have been paying through a rent portal.

   How It Helps: By enrolling in a rent reporting service, your on-time rent payments can be added to your credit history, which may positively impact your credit score, especially if you have a thin or limited credit history.

2. Experian RentBureau:

   Experian, one of the major credit bureaus, has a program called Experian RentBureau, which allows landlords and property managers to report rent payments directly to the bureau. This can help boost your credit score by adding a positive payment history to your report, similar to how credit card payments or auto loan payments are reported.

   Note: For this to work, your landlord or property management company must be enrolled in this program, or you may need to use a third-party service to report your rental payments.

3. FICO Score 9:

   In 2014, FICO Score 9 was introduced, which allows for rental payment history to be factored into your credit score if it is reported to the credit bureaus. This version of the FICO score considers positive rent payment history, which can help consumers with little to no traditional credit history build or improve their score.

   However, many credit bureaus and lenders still use older versions of the FICO score, which do not account for rent payments. Therefore, while rent reporting can potentially help increase your score, its effect may be limited depending on the scoring model used by a lender or creditor.

4. VantageScore 3.0 and 4.0:

   The VantageScore credit scoring model, used by some financial institutions, also takes rent payments into account, but only if those payments are included in your credit report through third-party services or if the landlord reports the payments.

   The impact of rent payments on the VantageScore will depend on the model version and whether the payment history is reported.

Steps Renters Can Take to Have Their Rent Payments Affect Their Credit Score:

1. Ask Your Landlord to Report Payments:

   If your landlord is willing, you can request that they report your rent payments to the credit bureaus. Some property management companies may already be part of programs like Experian RentBureau, or they may be open to using third-party rent reporting services.

2. Use a Rent Reporting Service:

   Renters can sign up for services like RentTrack, RentReporters, or CreditMyRent to have their rent payments reported to the credit bureaus. These services may charge a fee, but they can help ensure that on-time rent payments are included in your credit history.

3. Check with Creditors and Lenders:

   If you’re looking to build or improve your credit, it can be helpful to talk to your lender or creditor to confirm whether they use FICO Score 9 or a similar version that accounts for rent payments. Some lenders may be willing to consider your rent payment history as part of the underwriting process, especially if it is reported through one of the rent reporting services.

Example:

Lisa has been renting an apartment for five years and has consistently made on-time payments, but her credit score has remained low due to a limited credit history. She decides to use a service like RentReporters to have her positive rental payment history included in her credit report. After several months of reporting, her credit score increases because her on-time rent payments are now part of her credit history.