How to Use Rent Payments to Improve Your Credit
Using rent payments to improve your credit is now easier than ever. We cover the websites that can help you report your rent to credit bureaus.
If you’re among the 36.6% of US households that rent, you’re probably missing out on the single biggest credit reference: Your rent payment!
Traditionally, the only way that your rent payments affect your credit score is if unpaid rent goes into collection. Your many years of making rent payments on time aren’t even recognized. Fortunately, that situation is changing. You may be able to help your own cause by learning how to report rent payments to credit bureaus.
Here are several services that can help you do just that.
Experian has been moving forward in reporting rent histories through its Experian RentBureau. The service started in December, 2010, when Experian became the first credit reporting agency to include on-time rent payment data on its credit reports.
RentBureau will show your rental arrangement as a trade line, and includes your payments for the past 25 months. The data in the trade line will also show the date you started renting and your monthly payment amount.
There’s some really good news here, too. Experian will only include positive rental history. The reason is that negative rental information will usually show up as a collection account, which is already reported by the collection agencies.
Of course, there is a bit of a catch in the way this works. Your landlord won’t likely automatically report your rental history. That may be true even if you live in a very large apartment complex.
If you rent and you want your rent history included in your credit report, you’ll have to ask your landlord or property manager if they report to Experian RentBureau. If they do, you’re all set. But if they don’t, you’ll have to encourage them to do so. They may not want to. But there’s a workaround on how to report rent payments to credit bureaus.
How to Report Rent Payments to Credit Bureaus
To do that, you’ll have to have the landlord or property manager contact Experian RentBureau to set up the reference. Since there are fees (and extra work) involved, your landlord may have little interest in participating. If that’s the case, you can sign up for a rental payment service that works with Experian RentBureau.
When you do, you’ll actually make your rent payments through the rental payment service. The service will forward the rent to your landlord and then report the payment to Experian.
The downside to using a rental payment service is that you will usually have to pay a fee. Some services have a setup fee that could be as high as $50. But almost all have a per-payment fee as well. That fee can be a few dollars for each check payment or a percentage of either a debit card or credit card payment.
For example, if a service charges a 2.75% fee for a credit card payment and your rent is $1,000 per month, you will pay $27.50 per payment.
That’s obviously a bit steep. But if you’re looking to build a credit rating, it could be an expense worth paying.
Rental payment service providers that cooperate with Experian RentBureau include:
- PayLease – Must sign up to determine fees.
- PayYourRent – ACH fee (undisclosed) or 2.75% credit card fee.
- RENTTRACK – ACH $6.95, debit card 2.75%, credit card 2.95%. ***Also reports to Equifax and TransUnion.***
- ClearNow – Fees paid by landlord who might charge them back to you.
- eRentPayment – ACH/eCheck $3 per transaction. ***Also reports to Equifax and TransUnion.***
- rentler – $1.95 for bank transactions, 1.9% for debit cards, 2.9% for credit cards.
With services where the fee is paid by the landlord, it’s almost certain that the landlord will pass those fees on to you.
Rental Kharma is a service that reports your rent payment history to TransUnion. They do this after verifying your lease and your monthly payments with your landlord. After that, each payment that you make will be verified. You could also add your last 24 months of rent payments to fast-forward the process of building your credit score.
Rental Kharma isn’t a rental payment service. Instead, they contact your landlord once you’ve made your payment and verify that you made it on time. That means that though you will subscribe to the service for credit purposes, you will still make your rent payment directly to your landlord.
Rental Kharma also has what could be a big advantage for certain tenants. Rent payments are only considered late if they are more than 30 days past the due date. So if your rent is due on November 1, it will not be reported late to the credit bureau as long as it’s paid by November 30. But they do recommend that if you sometimes go beyond 30 days, you may not want to subscribe to the service. That is, rent payments more than 30 days late will count against you.
In order to join the service, you have to pay a one-time validation fee of $25. After that, you pay a monthly subscription fee of $6.95 for ongoing reporting. If you want to add your previous rent history, the fee is $5 for each month verified, up to a maximum of 24 months.
Your landlord must be willing to participate in the service, since they will need to verify your rent payments. But Rental Kharma is an easier sell to a landlord because the landlord isn’t required to pay any fees.
You can also get TransUnion involved directly in rent reporting through their RentReporters service. Like Rental Kharma, they verify your rent payments with your landlord and then include the history on your TransUnion credit report.
Their website advertises that “The average credit score can increase 35 to 50 points in 15 days” as a result of adding your rent history to your credit report.
RentReporters has a one-time enrollment fee of $45.95. That fee includes both the landlord verification process and reporting up to two years of previous rental payments. To continue reporting future payments, there is a monthly subscription fee of $9.95.
If you have had different landlords in the past two years, RentReporters can verify your rent payment history for an additional fee of $50 for each landlord.
So that’s how to report rent payments to credit bureaus. All you need is a few extra dollars and a willing landlord, and you can have your rent payment history added to your credit report. If that history has been a good one, you could see an almost immediate increase in your credit score.