On-Time Rent Payments May Now Improve Credit Score

Photo (cc) by faul

This post comes from partner site LowCards.com.

Paying rent on time may soon improve your credit score. For the first time, landlords have incentives to report rental payment history to credit bureaus. This can be good news for many renters who need ways to boost their score.

Experian recently purchased RentBureau, a credit bureau that allows apartment owners and managers to share rental payment history. Rental payment histories are now factored into Experian’s consumer credit reports, and are one more thing that lenders, landlords, insurance agents, and even employers can learn about you.

It seems surprising that rental payments have not been included in credit reports, but landlords avoided the stringent reporting and auditing requirements, only sending collections and evictions to credit bureaus. This could soon change because landlords will benefit from using RentBureau’s database to make background checks and screen rental applications.

“This could be great news for renters who dream of owning their own home. This gives them a way to build up their credit score and qualify for a mortgage with a lower rate,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

According to the National Multi Housing Council, 33 percent of U.S. households are renter-occupied households. Rentals are rising as homeownership in America dropped to its lowest level in 13 years. The Census Bureau reports homeownership rate fell to 66.5 percent of all households in the last three months of 2010, down from 66.9 percent in the third quarter.

Many of these renters are college students, recent college graduates, immigrants, victims of foreclosure, and people with poor credit. It is difficult for many of these renters to get the credit needed to start building their credit score. A good rental history could help build credit and prove they are creditworthy, even if they don’t have a history with a credit card or a mortgage payment.

Experian displays the 25 most recent months of rental payment history, if it is available. It does not add negative information, such as a collection account, because this is already sent to credit reporting companies through collection agencies. Experian is the only major credit reporting company to incorporate positive rental payment into consumers’ credit reports.

“If reporting rent is successful for Experian, expect other credit reporting agencies to find ways to expand their own reports,” says Hardekopf.

Landlords can use credit scores to screen applicants

Many landlords use credit scores to help pre-screen renters. However, the level of acceptable risk varies by landlord, and there is no universal cutoff score used by all landlords. They also consider other factors, such as the ratio of debt and expenses to income. They want renters to be able to pay rent, decrease debt, and have enough money left to buy groceries and insurance and pay other expenses.

If you have a bankruptcy or a negative credit history, it may help to write a note that tells what happened and the steps you are taking to work it out. You can also include a list of references, including employers or former landlords. You can even offer a larger deposit on the rental.

Utility bills

On-time payment on utility bills won’t improve your credit score, but outstanding bills can drag it down. If you get behind or stop making payments on your utility bills, the utility company will likely turn your account over to collections. This is a negative mark on your credit report and makes it difficult to rent an apartment or get a mortgage. If you can’t pay your utilities, you are at a higher risk to miss rent payments.

New regulations

New regulations are trying to help consumers understand their credit reports. If you are turned down for an apartment or utilities because of your credit report, the lender must send you a notice and information on how you can receive a free copy of your credit report. Starting in July, anyone who denies you credit or gives less favorable terms must provide the credit score. This also applies to landlords and utilities.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
9 Genius Storage Solutions for Your Home
9 Genius Storage Solutions for Your Home

These creative products on Amazon will hide unsightly clutter while saving space.

5 Countries Where You Can Retire on $2,000 a Month or Less
5 Countries Where You Can Retire on $2,000 a Month or Less

These tips on retiring overseas come from someone who’s been helping American expats for decades.

7 Surprising Things That Damage Your Credit Score
7 Surprising Things That Damage Your Credit Score

A seemingly small stumble can cause your credit score to plummet.

17 Surprising Things You Can Clean in a Dishwasher
17 Surprising Things You Can Clean in a Dishwasher

It’s often easier and faster to put these household items in the dishwasher than to clean them by hand.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

The 4 Best Things to Buy in January — and 4 to Avoid
The 4 Best Things to Buy in January — and 4 to Avoid

As a new year dawns, deals abound for some types of products. In other cases, it pays to wait.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.