Does Renting Build Your Credit?



Every timely payment you make counts if your ultimate goal is to build your credit. Your monthly rental payments might be one of your biggest expenses every month. But does renting build your credit in the first place?

A short and simple answer is not necessarily. Although making timely rental payments might be able to help build your credit, this isn’t necessarily automatic.

Read on below to know more about rental payments and their effect on your credit score.

Will Your Rent Payment Affect Your Credit Score?

While you can use your credit card to pay your rent, it will only affect your score if it is reported to one or several major credit bureaus namely TransUnion, Equifax, and Experian. A lot of renters are surprised to learn that most landlords and property managers don’t really report to credit bureaus.

Every time there is a report of your rent payment to the credit bureaus, the apartment lease will show up as a tradeline in your credit report’s accounts section. Your report will also show the date of the start of your lease, the amount of your monthly payment, and your history of payment for a maximum of 25 months.

Since your payment history is among the key factors that influence the calculation of your credit scores, the on-time rental payment history on your credit report might help boost your score.

Take note of the use of the word “might” here instead of a more definite “will.” This is because rental data is only considered in several credit scoring models. Newer FICO Score versions like FICO 10 and FICO 9 as well as VantageScore consider rental history. However, most lenders still use older versions as the basis for their credit decisions.

How to Improve Your Credit Through Rent Payments

If you like to boost your credit score using your rental payments, you need to ensure that these payments are reflected on your credit report.

However, the issue here is that tenants don’t have the ability to report to the credit bureau themselves regarding their positive rental history.

You will need either a third-party credit reporting service or ta landlord to report your rental payments on your behalf.

It is also a good idea to check if your landlord uses software that will let you report your rental payments.

How Much Will Rental Payments Help Build Your Credit?

For example, your credit report already reflects your rental payments. How much boost in your credit score could you expect from it, then?

It is important to remember that the credit profile of every individual is unique and distinct so there aren’t any guarantees here. But it has been revealed that most people who had a credit score already before the addition of their rental data to their credit file discovered that adding the history of their rental payments was able to boost their score. Once again, however, it will still depend on where you are starting from and what scoring model you are using.

Paying your rent and reporting it to major credit bureaus is just one way to build your credit score. It doesn’t matter if your property manager or landlord reports your rental payments, don’t forget that your payment history is the key factor that affects your credit score. Be sure to pay your rent every time on time to see an improvement on your score over time.