Could paying rent on time boost your credit score?
With around 43 million Americans renting their homes, there are a lot of people who are missing out on the opportunity to build their credit. Rent payments are one of the most significant monthly expenses, often constituting 35% of one’s income. So it seems like a shame that this notable expense is left unaccounted for on the credit report.
Credit scores can offer financial freedom that might otherwise be unavailable. A good credit score can help you buy a new car, lease a better apartment, get a job, or apply for a loan. But, for those who have no credit or face a low credit score, they are left paying higher prices on phone, insurance and credit card contracts.
But how much can reporting your rental payments actually help you? If you fall behind on payments, will it hurt you worse? Here are a few answers to the questions you may be asking:
1. Will reporting my rental payments help my credit?
Last year, New York City comptroller Scott M. Stringer partnered up with Experian to investigate how rent payments could play a factor in people’s credit scores. With a small sample of New Yorkers who paid less than $2,000 per month, the report showed a rise in around 76% of the renters’ credit scores. The average credit score for these renters rose to an average score of 700 – a prime, or good, credit score.
These tenants didn’t have to change anything in their lives to see this significant credit boost. Simply by reporting a payment that they were already making to the credit bureaus each month, they were able to have access to many financial opportunities and savings associated with an increased credit score.
2. Will reporting my rental payments hurt my credit?
Sometimes life hits you hard and it’s hard to get back up again. If this happens and you fall behind on your rental payments, it will end up hurting your credit score whether you’re reporting your rental payments each month or not. When you fall behind on your payments, the landlord will send the bill to collections, or evict you, and your credit score will drop.
When it comes to renting, the credit system is very good at penalizing delinquency, but it’s terrible at rewarding financial consistency.
However, if you report your on-time payments each month, your credit will increase. So if you hit a hard time, it may not fall as low as it would have otherwise. Reporting your credit score each month will help more than it can hurt.
3. How can I report my rental payments to the credit bureaus each month?
This is the easy part. Just contact your leasing agent or property manager. Ask them if they offer a rent-reporting service, like RentPlus. Enroll in RentPlus and continue to pay your monthly rent bill on time. RentPlus will work with your property manager to report your rental payment to select credit bureaus. The credit bureaus will record your monthly rental payments on your credit report. Then you can sit back and relax as your credit increases and your financial situation improves.
Renting an apartment has so many positive benefits. The only drawback is if you’re not able to increase your credit while enjoying the many other rental perks. So contact your leasing agent or property manager today to learn more about how you can start reporting your rental payments to credit bureaus today.