Most people know that when they inquire about a rental property, the landlord often will run a credit check to get a sense of their reliability. But people are less certain about what happens after the lease has been signed. Do your rent payments affect your credit score?
The answer is not as clear-cut as you might think. While rent-payment reporting is becoming increasingly common, it's far from a universal practice. What's more, not all credit-scoring models take this information into account. Here's a brief overview of how rent reporting works and how to find out if your rent payments are being reported to the credit bureaus.
How to find out if your rent is being reported
The easiest way is to simply ask your landlord. Most do not, but the practice is becoming increasingly popular thanks to the rise of rent-reporting services. These enable landlords to enter information about your payment history each month and submit it to the credit bureaus. Some of these are directly affiliated with one of the three bureaus and may only report to that bureau, while third-party rent-reporting services may report to more than one.
Regardless of where your rent is being reported, it's important to stay current on all of your payments. You can't be sure which report a lender will look at the next time you apply for a loan, so you must do your best to keep all of your reports in good standing.
Reported rent can help or hurt you
All three credit bureaus will list any reported rent payments on your credit reports. If you've always paid on time, then your rent reporting can show that you're a responsible payer. This increases your odds of approval when you apply for a loan or a credit card in the future. It's worth considering, especially if you don't have many other credit accounts in your name to help build up your history.
On the other hand, if you regularly miss payments, rent reporting will hurt you rather than help. Anyone who pulls your credit report will see your spotty payment history, and could may make them hesitant to lend to you. And note that if your account goes to collections, it won't matter whether your landlord regularly reports rent or not; the collections action will still show up as a black mark on your credit report.
While you can guarantee that reported rent will show up on your credit report, it may not always affect your credit score. The most widely used credit-scoring model -- the FICO Score 8 -- doesn't count rent payments in its calculations. However, newer versions of the FICO score, including the FICO 9 and FICO XD, do include them.
VantageScore, another common credit scoring model, includes them as well. There's no way to know which score a lender will look at when considering your loan application, though, so it's safest to assume that, if your rent is being reported, it will impact your score.
What to do if your landlord doesn't report rent
If you'd like to get credit for the rent you're paying, the simplest solution is to ask your landlord to begin reporting it. If they refuse, you can always try reporting it yourself through a rent-reporting service. However, many of them charge fees, and some only enable you to sign up if your landlord is a member. Explore your options and decide whether the potential benefit to your credit score is worth the cost and hassle for you.
Another option is to pay your rent by credit card each month. Regular, on-time credit card payments can also help to boost your credit score. If you're going to go this route, make sure you can easily afford to pay back what you owe at the end of the month. Otherwise, the remaining balance will begin to accrue interest, and this can make it challenging to pay off. Also note that many property managers charge a sizable fee for credit card transactions, which may outweigh the benefit to your credit score.
It's difficult to predict whether your rent payments actually will play a role in your next credit application. It all depends on whether your landlord reports it and whether your lender looks at a credit score or report that includes it.
The best policy is always to act as if it will matter. Do your best to pay in full and on time each month and communicate with your landlord immediately if you run into any problems. That way, rent reporting can only help you.
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