How to Use Rent Payments to Increase Your Credit Score

Are you one of the over 40 million people currently renting? Here's a little secret: it can help improve your credit score.

Like it or not, your credit affects just about every aspect of your financial life. Whether you’re trying to buy a house, a car — or even a fancy new phone, your credit score is the first thing lenders will look at to determine your ability to pay. And a good score always translates to lower rates and more favorable terms.

But building credit can be difficult, especially if you find yourself in the catch-22 of needing credit to establish credit. The good news is, if you’re a renter, there are several ways to report your monthly payments which could help improve your score and build your credit history.

Rod Griffin, senior director of Public Education and Advocacy at Experian, says that reporting this information is not only a very powerful tool for those who are looking to establish credit for the first time, but also for those who’ve faced credit challenges in the past.

“It's one of those rare things where we see improvements almost immediately and across the board,” Griffin says. In fact, Experian’s latest study on the subject found that roughly 75% of the participants who opted to include their rental payments as part of their report saw their credit scores improve between 11 and 29 points.

So, if you’ve been paying your rent like clockwork, here’s how you can make it count toward your credit.

Talk to your landlord or property management company

Even if you’ve made on-time payments for years, the odds of this being reflected on your credit report are slim.

Why? Because just like your water, power, and other utility bills, rental accounts are considered “non-traditional credit tradelines.” This means that creditors are not required to report them to the bureaus the same way they would a mortgage or an auto loan.

That being said, all three bureaus (Experian, TransUnion and Equifax) will add this information to your file if they receive it. However, this isn’t something you can report to them yourself. For this to happen, your payments must be collected through a payment processing platform, like RentTrack, Esusu, or Zego, which also offer rent reporting services.

Griffin says that if you’re renting from a large property management firm or a landlord that manages multiple units, chances are that they are already using one of these platforms to help them keep track of their payments. It’s as simple as just asking them.

“In some cases, they will provide the service of having your payments reported as an incentive for being a good renter,” Griffin says. “They may add to your rent a little bit to cover those costs, but often it's done at no cost to the renter by the landlord,” he adds.

This is why he recommends checking with your landlord first, as this is the easiest and most cost-effective way to add your rental payment history to your credit report.

Subscribe to a rent reporting service

If you’re renting from an individual landlord or a small property management firm, they may not be utilizing a large-scale payment processing platform, as it probably doesn’t make sense for them, financially speaking.

The good news is that even if your landlord doesn’t use one of these platforms, companies like Rock the Score, Zingo, CreditMyRent and Rental Kharma, allow tenants to subscribe individually.

Monthly fees vary depending on the company you use, but you can expect to pay anywhere from $6.95 to $14.95 a month to have your rent payments reported. Some of them may also require you to pay a one-time setup fee that can be as low as $48 or as high as $149.

One of the benefits of using one of these companies is that you’ll also have the option to report up to 24 months of rental payments. This can further benefit your credit, as account history makes up 15% of your credit score, according to FICO.

Rent reporting companies validate your payment history in two ways: by checking your bank statements or credit card accounts, or by sending your payments directly to your landlord. Some of them also let you upload copies of canceled checks or rent ledgers to prove your monthly payments.

Use a credit card to pay your rent

Granted. Very few landlords accept payments via credit card, and those who do will typically charge you a merchant processing fee for doing so.

Doug Minor, a California-based credit reporting, scoring, and mortgage damages expert, says that this fee can sometimes be as much as 3% of your total rent payment. “So, depending upon how large your rent payment is, that can be a considerable amount,” he says.

Using your credit card to pay your rent won’t appear as a separate account or tradeline within your report, but it can still boost your credit by improving your payment history, which makes up 35% of your score. But for this to happen, you must pay your balance in full each month.

Additionally, depending on your card’s perks, you could recoup processing fees — and then some — if your card offers cashback or rewards points for these transactions.

What to keep in mind when reporting your rent

Adding on-time rent payments to your report almost always results in positive changes to your credit, but be aware that it’s possible you may see a slight drop in your score initially. This is because whenever you add a new account — whether it’s rent, a car loan, or a credit card — it takes time for the bureaus to process this information.

“I always tell people to not look at their scores immediately,” Griffin says. “Give it a billing cycle or two, so that the information can stabilize, and then you’ll see that your scores will go back up to where they were, or improve in the case of rent reporting,” he adds.

Experian, TransUnion and Equifax also don’t exchange information with one another and use different credit scoring criteria. This means that you may get a different score from each bureau, even if they receive the same information.

Besides that, some rent reporting services only share your data with certain agencies. For example, PayYourRent reports your payments to all three credit bureaus, while Rock the Score only reports them to TransUnion and Equifax. So, make sure to check this information before you enroll.

Finally, if you’re using your credit card to pay your rent, Minor recommends looking into your credit limit first, to make sure this transaction won’t max it out, as this could temporarily impact your credit utilization and hurt your score.