August 7th, 2014
When it comes to financing, just about everything revolves around your credit score, or at least your credit record will play a part in your housing and car. Whether you want to buy a home or finance a new vehicle lease, your credit score will determine whether you're a qualified borrower. Even if you're not purchasing something major like a new home, your score will still be important if you're renting an apartment or a home.
There are many ways to boost your credit score, but homeowners and those with auto loans may have an easier time getting rewarded for making their payments on time. By comparison, renters typically don't get the same kind of recognition on their credit report for paying rent each month. Because of this, some renters are calling on credit card reporting agencies to start including on-time payments to allow tenants to boost their scores.
The case for reporting
When you apply to rent an apartment, the landlord will likely run a credit check to see what type of borrower you are. It makes sense that landlords want to rent to people who are likely to pay on time. However, some renters may not have much credit history and will need a cosigner to secure a lease. Or, they could be excluded from getting the lease altogether.
If on-time rent payments could be counted for tenants, then many more would have better credit histories. Recently, the credit bureau Experian released a report that outlined how much renters could benefit from their rent being included as part of credit reports. Experian found that without rent payments, 11 percent of renters had no credit history, which could leave them out of financing opportunities that have credit qualifications.
In addition, when rent payments were added to simulated credit reports, 59 percent in the study had prime credit scores. This would make them eligible for greater financing opportunities. Only 3 percent of renters had subprime scores in the study, showing just how great of an impact rent payments can have. In a time when many Americans are still recovering their financial losses or trying to improve their credit after the recession, adding rent into the credit equation could improve the lives of many.
How renters can boost their score
While rent is not currently a part of regular credit reporting, there are ways to get these payments to count toward your history. This will help secure future leases and other financial goals like buying a home or a new vehicle. A few services have appeared over the past few years that make it easy for rent payments to be reported to credit agencies, though not all of these are free. For those without much credit history, however, it may well be worth the cost.
The first way renters can get these payments reported is just to talk to their landlord. Many responsible tenants who pay their rent on time and have renters insurancecan develop a good relationship with their landlord, which can pay off to have the him or her join the RentBureau program. This program will report payments to Experian, but the landlord needs to sign up for the system for the data to be processed.