Adding rent payments to your credit report could help lift your credit score

Paying your rent on time not only makes your landlord happy, but also improves your credit score. Several research studies have found that positive rental payments are good for your credit score, increasing 10 to 40 points or more, if lenders use a score that incorporates rent payments. That’s why many people are adding their rent payments to their credit report.

Studies show positive effects for consumers with low or no credit scores

VantageScore has been incorporating rent payments into consumers’ credit scores since its beginning in 2006. But, it’s necessary to report to a credit bureau.

Meanwhile, a study found that reporting on-time rent payments to credit bureaus has positive impacts on renter’ scores.

According to this research, the numbers of tenants with subprime credit scores from TransUnion decreased from 55% to 37% when including on-time rental payments.

They concluded that the problem of credit invisibility and unscorability can be dramatically reduced; many who were formerly unscorable could achieve some variant of a prime credit score.

Another study found that tenants’ credit scores increased 29 points after two months of rent payment reporting. Overall, their scores increased 59 points over a 21-month period.

Rent payments are irregularly reported to credit bureaus, lenders

Those studies are encouraging tenants to pay their rentals on-time, because they want to improve their credit score. But, not every landlord reports on-time rental payments to the credit bureau, so not everyone will enjoy this benefit. In 2017, only 0.3% of renters had rental payments included in their credit reports.

However, landlords can be persuaded. According to a recent study by TransUnion, 73% of renters said that they’ll be more motivated to pay their rentals on-time if they knew that it would be reported to the credit bureaus.

In the case your landlord doesn’t want to report your rental payments to a credit bureau, you can look for a third party to help with the reporting of your payments.

Another situation is when your landlord uses a credit score model that doesn’t incorporate rental payments into its credit score calculation. In that case, even if your landlord reports your rental payments to a credit bureau, your score may not improve for it.

In 2014, when FICO released FICO Score 9 and FICO XD, the credit score was improved because of the rental payments if the landlord reported the information to all three credit bureaus.

So, if you want your rental payments improve your credit score, you’ll need that your lender uses VantageScore, Fico Score 9, Fico XD or uses its own proprietary score that factors in rent payments.

How to get your rent payments added to your credit reports

Even though rent payments aren’t always used to evaluate new loans, it’s still a good idea to try to get your rent payments incorporated into your reports, especially if you have a bad score.

In the case your landlord doesn’t report rental payments, you have some options, but you need to pay a fee. That’s because you can call a third party company, such as RentTrack, Rock the Score, Rent Reporters or Rental Kharma. However, the fees can be high, like $6.95 a month to $9.95 a month. But, it can be worth it if it improves your credit score.

The Bilt Rewards platform is an excellent option too. It will allow you to earn rewards by paying rent using the app or their soon debuting Bilt Mastercard. And it works even if your landlord doesn’t accept credit cards or isn’t a Bilt Rewards Alliance property. With this app not only can you earn rewards for paying rent, but you’ll skip out on fees for the service and build your credit score with every on-time rent payment.