Rent payments dont typically affect your credit — but they can in a few circumstances. The consequences can be significant.
Rent doesnt show up in your credit history, experts say because landlords dont usually report payments to credit bureaus as credit card issuers and other lenders do.
When rent payments do appear, its generally because a tenant — or a property manager on a tenants behalf — has enrolled in a so-called rent reporting program. These services are meant to provide tenants with the opportunity to grow their credit history through on-time rent payments.
“The good news is that there are a lot of them out there,” said Matt Schulz, chief credit analyst at LendingTree. “Its certainly been a growing space over the last few years.”
If you fall behind, however, those services can also hurt your credit, experts say. And whether you report your rent to the bureaus or not, debt collection efforts for late or unfulfilled rent payments can also be a black mark on your credit.
The Consumer Financial Protection Bureau began accepting complaints about rental debt collection in August 2023. Since then, there have been roughly 10,960 consumer complaints about rental debt collection in the U.S., per CFPB data through Feb. 21.
For millions of Americans, rent is one of the largest monthly expenses. With housing costs continuing to rise across the country, many renters are looking for ways to build their credit and qualify for better rental options or mortgage rates in the future. This has led to increased interest in services that report rent payments to credit bureaus
So how exactly does paying rent affect your credit score? Here’s what you need to know
How Credit Scores Are Calculated
Your credit score is a three-digit number calculated based on information in your credit report. The two most common credit scoring models are FICO and VantageScore.
FICO scores range from 300 to 850. VantageScores also range from 300 to 850. In both models, a higher score indicates better credit health.
Your credit score is determined by these five factors:
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Payment history (35% of FICO score): Whether you pay your bills on time. This includes all accounts reported to credit bureaus like credit cards, loans, utilities, etc.
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Credit utilization (30%): The ratio of credit you’re using compared to your total available credit.
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Length of credit history (15%): How long you’ve been using credit. Typically based on the age of your oldest account.
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New credit (10%): How many new accounts you have and how recently they’ve been opened.
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Credit mix (10%): The variety of account types you have, such as credit cards, retail accounts, instalment loans, mortgages, etc.
As you can see, payment history has the greatest impact (35%) on your credit score. On-time rent payments help build your payment history, which can improve your credit over time.
Does Rent Get Reported to Credit Bureaus?
Traditionally, most landlords haven’t reported rent payments to credit bureaus like Experian, Equifax, and Transunion. So simply paying rent on time doesn’t automatically affect your credit.
However, new services have emerged that allow landlords or property managers to report your rental payment history to credit bureaus. This gives renters an opportunity to build credit by paying rent on time each month.
According to credit bureau TransUnion, only 15% of renters currently have their rental payments reported to credit bureaus. So while rent reporting is gaining traction, it hasn’t become a common practice yet.
How Rent Reporting Affects Your Credit
If you use a rent reporting service, your on-time rent payments will appear in the payment history section of your credit report.
This establishes a track record of responsible payment behavior and can improve your credit, especially if you have little other credit history. People with thin or no credit tend to benefit the most from rent reporting.
However, the impact on your credit score depends on your entire credit profile. If you have late payments on other accounts, your score may not improve much even with positive rent payment history.
Here are some potential benefits of rent reporting:
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Builds credit history – Shows you can manage a recurring payment responsibility.
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Boosts credit score – Demonstrates on-time payments. Improves payment history component.
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Establishes rental history – Helps meet requirements for future apartment applications.
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Looks better to lenders – Proves you can manage monthly bills responsibly over time.
At the same time, there are some limitations to consider:
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Most services only report to one credit bureau, not all three.
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Not all credit scoring models consider rental payments.
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Impact on your score depends on your overall credit profile.
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Late rent payments could negatively impact your credit score.
Overall, rent reporting provides an opportunity to strengthen your credit, especially if you have little other credit history already established. Just be sure to pay rent on time every month because late payments could actually damage your credit score.
How to Get Rent Payments Reported
If you want to report your rent to credit bureaus, here are a few options:
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Talk to your landlord – Some property managers already work with a rent reporting service. Ask if reporting is available.
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Use a rent reporting service – Companies like PayYourRent and RentTrack allow renters to report rent. Some services charge fees.
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Pay rent via Zillow – Zillow’s rent payments tool lets you report rent to Experian for free.
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Set up automatic payments – Automatic payment systems like RadPad can report rent. Be sure to choose auto-pay.
When choosing a service, look for one that reports to all three credit bureaus for maximum impact. And beware of services that charge high monthly fees.
Start by discussing options with your landlord. If they don’t already report through a management system, research rent reporting companies to find one that fits your needs.
Tips for Improving Your Credit With Rent Payments
If you decide to report your rent to credit bureaus, here are some tips:
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Make payments on time every month. Even a single late payment could negatively impact your credit.
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Pay in full each month. Partial payments likely won’t have the same positive effect.
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Be aware late fees may be reported as late payments. Avoid late fees to protect your credit.
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Notify your landlord quickly if a payment will be late for any reason. See if they’re willing to waive late fees.
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Contact credit bureaus to correct any errors in reported rental payments right away. Disputes can protect your score.
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Monitor your credit reports regularly to ensure accurate reporting of your payment history.
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Consider signing up for credit monitoring to track changes in your credit due to rent reporting.
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Practice good credit habits with all accounts, not just rent. Things like keeping balances low and not applying for too much new credit will also help your score.
The Bottom Line
Paying rent on time is a great way to demonstrate responsible financial behavior. While rent reporting is still gaining adoption, services are available that allow you to build your credit history by paying rent.
Just make sure to pay every bill on time, across all your accounts. With a diligent rent payment history added to the mix, you can strengthen your credit profile and open up more options in the future.
Rent reporting can help the ‘credit invisible’
Rent reporting can especially help those who are “credit invisible” or do not have any credit history. If youre looking for ways to grow your credit, such platforms can be a helpful tool.
Those who have enrolled typically see their credit scores increase. When rent payments are included in credit reports, consumers see an average growth of 60 points to their credit score, according to a 2021 TransUnion report.
But if you fall behind on your rent payments, that activity could be also reflected in such tools, and in turn, your score, experts say.
Whats more, rent reporting services are not always free and do not always report the data to all three major credit bureaus, experts say. For example, rent reporting platform Rental Kharma charges $8.95 a month after an initial setup fee of $75. The service reports the data to two of the three bureaus: TransUnion and Equifax.
Does Late Rent Payment Affect Credit Score
FAQ
How much does rent affect credit score?
Those who have enrolled typically see their credit scores increase. When rent payments are included in credit reports, consumers see an average growth of 60 points to their credit score, according to a 2021 TransUnion report.
Does renting show up on a credit report?
… of creditworthiness, and modern credit scoring systems are equipped to factor it into your credit scores—but it likely won’t appear on your credit report …Sep 15, 2023
Can unpaid rent affect my credit?
Yes. The big three consumer reporting agencies, Experian, Equifax, and TransUnion, use rental payment and related debt collection information in their credit reports, although the way they handle this information varies.
Will apartments accept a 500 credit score?
Q: Is a 500 credit score bad for an apartment? A: A 500 credit score is generally considered low for renting an apartment.Feb 14, 2024