You’ve always paid your rent on time, so you’ll be rewarded with good credit, right? Not necessarily — traditionally, rental payments (although a major expense for many Americans) haven’t been factored into credit reporting and scoring unless payments are late and the landlord sends your bill to a collector.
While credit bureaus and even FICO are increasingly incorporating rental-payment data, whether it ends up on your credit reports (or gets factored into your credit score) isn’t exactly straightforward.
A credit-scoring black hole
If you get a credit card or a loan, it’s practically certain that your payments (on-time and late) will end up on your credit reports and therefore be factored into credit scores. That’s because banks have long-standing data-furnishing relationships with the credit bureaus. That’s not the case for the many small-time landlords. In fact, it’s not even the case for many large landlords. Because credit-scoring services (like FICO) use data on your credit reports to produce a score, they often can’t factor in your rental payments.
How rental data may end up on your credit reports
Credit bureaus and scoring algorithms alike have been increasingly experimenting with rental-payment data to help them get a read on those who rent instead of own their homes.
For example, housing data (including rental data and homeowners association fees) are “an area of great interest and focus” for credit bureau Equifax, says Marisa Salcines, Equifax spokesperson.
“Generally speaking, creditors and lenders like to see a healthy mix of the type of credit being used by consumers, as well as a successful track record of being able to honor financial commitments,” Salcines says.
How rental payments find their way to your credit report differs by bureau. TransUnion and Experian have their own rental-reporting divisions – Experian RentBureau and TransUnion Resident Credit. Both allow property management companies of certain sizes (more than 100 units for TransUnion, more than 500 for Experian) to directly contribute rental-payment data to those divisions. As for Equifax, it accepts data from property management companies and third-party rental-payment services RentTrack and Sperlonga Data & Analytics, Salcines says. Landlords who allow tenants to pay rent via these services can choose to automatically have their rental-payment data sent to Equifax.
Smaller property managers and individual landlords can sign their tenants up for third-party rent-payment services (such as PayYourRent and RentTrack), which have reporting relationships with the bureaus. Experian also recently inked a deal with Yardi, which provides software for property management owners; property owners who use Yardi will have their tenants’ rental data sent to Experian automatically.
Getting credit for on-time rental payments may be good news for many – but what about getting punished for late payments? The bureaus’ policies differ when it comes to reporting negative data.
Equifax and TransUnion report both positive and negative information. Experian RentBureau, meanwhile, collects both positive and negative information but includes only positive information (on-time, paid-as-agreed) on credit reports, according to Emily Christiansen, director of RentBureau.
How rental data may affect your credit scores
Credit scores are at the mercy of your credit reports. FICO incorporates rental-payment data if it’s on your credit reports – but only into its FICO 9 model (which most lenders don’t use yet). Likewise, the less-popular scoring model VantageScore includes rental data if it appears on the credit report.
Assuming they’re reported, rental trade lines are reported like other trade lines, meaning your payments can affect various components of your credit score.
“As an example,” says Can Arkali, principal scientist at FICO, “a consumer with a long and positive rental payment history will receive the benefit of this information in both payment history and length of credit history categories in FICO Score 9.”
When your lease ends, your rental trade line will be treated the same way the bureau treats any other closed credit line (which is determined by the Fair Credit Reporting Act), Christiansen says on behalf of Experian. Positive accounts stick around on your report for 10 years, while accounts with negative history stay for seven.
Use the chart below to see how the major credit-scoring/reporting players may be using your rental-payment data. We gathered this information from company spokespeople as well as information published on the websites of the companies featured in the chart.
|Rental data used?||YES||YES||YES||YES, but only in FICO 9|
|Where it gets rental data||Directly from property management companies with 500+ units|
Third-party rent-payment companies (Yardi, PayLease, PayYourRent, RentTrack, ClearNow)
|Directly from property management companies (no minimum reporting threshold)|
Third-party rent-payment companies (RentTrack and Sperlonga Data & Analytics, among others)
|Directly from property management companies with 100+ units|
From third-party rent-payment companies (RentTrack)
|Credit reports from the major bureaus (assuming it’s being reported)|
|Positive AND negative info used?||Collects positive and negative info, but includes only positive on reports||YES||YES||YES, assuming both are reported on credit reports|
How to get your rental data reported
Landlords who report to the credit bureaus (or who use a third-party service that does) are extremely rare.
“FICO strongly supports the incorporation of rental data into the credit bureau file, but rental data is rare in credit bureau files,” Arkali says. “In fact, today, rental trade lines are present on well less than 1 percent of all consumer files.”
If you want your rent payments reported, you can ask your landlord to use PayLease, PayYourRent, RentTrack, ClearNow or another payment service that reports to the bureaus. Some of these services even allow you to send your landlord a request via their site. If your landlord signs up, however, they may pass the costs (these services charge fees) on to you.
Because getting your rent payments on your credit report is so dependent on your landlord, check out these other ways to build credit.