Your monthly rent is one of the most important bills you pay every month.
All these timely rental payments should count for something, right?
In a sense, renting an apartment is like a 12-month loan that returns in monthly installments. At least that’s a landlord’s excuse when they check a credit report before renting an apartment for you. From this perspective, timely collection should help your credit score, especially since late payment of rent and eviction could completely destroy your credit score.
This will not only destroy your ability to rent a new apartment but also make it difficult to get approved for credit cards and loans.
Credit bureaus and rental reports
Recently, some apartment complexes have started reporting rentals through Rent Home with the rental billing reporting system now owned by Experian, one of the three major credit bureaus. If you rent from an owner using Rent Home, your monthly rents will appear on your credit report, improving your credit score – but only your score with Experian since credit bureaus don’t share data.
TransUnion has a service called Resident Credit that allows property executives to report rental payments, either directly or through a third party. The Tenant Credit Report will show the last rent paid, the next rent due, the timeliness of the payments, and any objection regarding payments that are overdue but received before the 30-day deadline.
But the service is only available to companies with 100 or more properties. If you are renting from a smaller owner or property management company, they are probably not using ResidentRent.
There are several smaller companies trying to collect and report rental payment information.
How a rental report helps your credit score
Although there has been some progress in reporting on lending to timely payments, it is not widespread. If you rent from a smaller business or an individual owner, you are less likely to report the lease payments to credit bureaus.
Even when billing payments are included in your credit report, they do not guarantee that your credit score will help. In a 2014 New York Times article, a FICO spokesman said that FICO does not include billing history in credit ratings. This means that even if your leases are reported to credit bureaus, it will not help your credit score. However, it can help if the homeowner manually reviews your credit report looking for positive traditions.
Late payments and other delicts will almost always be hurt
In negative situations, renting can hurt your credit score in some cases. For example, if you are late in paying your lease, terminate your lease, evict or pay no departure fees, and the landlord reports this offense to any of the three credit bureaus, including Equifax and TransUnion, which will hurt your credit score. Due balance sheets can also be sent to a billing agency that could report the invoice on your credit report.
If your landlord is suing you for eviction, you are likely to have a credit score withdrawn.
Using a credit card to pay your rent
You can use a credit card to pay the rent and increase the credit score indirectly. Open a credit card and use it to pay your rent (if your landlord accepts credit cards as a payment method), then pay your credit card amount every month. Timely credit card payments will help you maximize your credit score. Please note that some landlords may charge a processing fee if you use a credit card to pay your rent.