Building a strong credit history is hard when you don’t have years of experience with paying down debt. You might also be hesitant to open up new lines of credit when you are applying for a mortgage loan. If you look at your financial track record, one thing you might notice is that you’ve been paying rent for years. Getting the rent reported to the major credit bureaus is one way to demonstrate financial responsibility.
How Rent Reporting Can Boost Credit Score
Rent payments are not typically reported to the credit bureaus automatically. This means that you will need to take a few steps to make it happen. You might be able to get rent reported for free in some cases, but you will typically need to pay a fee. You could also have better options to build your credit, but it is worth looking into this option.
Will Rent Payments Show Up On My Credit Report?
There are three major credit reporting bureaus. They are Experian, Equifax and Transunion. They each compile data about your financial standing to put into reports that are accessible to lenders.
There are also two major credit scoring companies called VantageScore and FICO. FICO uses several versions to calculate credit scores. Right now, the more commonly used ones do not always include rent payments. Newer versions that are increasing in use do count rent payments that get reported. VantageScore will include reported rent payments in their scoring system.
How Do You Set Up Rent Reporting On Your Own?
There are several rent reporting services that you can set up independently. Keep in mind that some of these require your landlord to verify that you make your rent payments on time. These services can also range in price. Some require an initial enrollment fee followed by a monthly reporting cost. They can also vary according to how far back they go when reporting payments. When you select a reporting service, make sure to check that they report to your preferred credit bureau.
What If My Landlord Will Help?
Some landlords and property management companies offer rent reporting as an amenity to renters. They know that reporting rent serves as an incentive to get people to pay on time. This service can also attract financially-savvy tenants who want their payments to count.
ClearNow is one service that you might see. This one requires you to accept having your rent payments be automatically deducted from your checking or savings account. It comes with the benefit of being free for tenants if your landlord signs up. There are also other services for landlords and it is best to ask yours if they offer this option.
What Are Other Strategies to Build Credit?
Rent reporting services tend to come with the slight disadvantage of only reporting to one or two credit bureaus. Other methods of building credit tend to be more likely to get recognized by all of the credit reporting companies. For example, you could get listed as an authorized user on a trusted family member’s credit card. Taking out a small loan can also help you to build your credit by showing regular payments.
When you think about how long you pay rent, it only makes sense to find ways to use it to your advantage. With the right service, you could boost your credit score enough to help get a better interest rate on a home loan.