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While rent payments don’t traditionally affect your credit, a growing number of so-called rent reporting services are trying to change that.
These services track users’ rent payment habits and report them to one or more of the major credit bureaus — Equifax, Experian and TransUnion — with the goal of helping renters build credit and potentially boost their credit score.
But these services don’t all work the same way, and some may be of less value to renters. There’s one important detail to consider before signing up, said Matt Schulz, chief credit analyst at LendingTree: Does your payment record go to all three bureaus?
“It’s important for people to understand that you don’t just have a credit score,” he said. “You just don’t know which agency your lender will use to get your information.”
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How rent reporting programs work
This week, site real estate Zillow Group launched a new rent payment reporting function. Tenants who pay through the site can now choose to report their on-time rent payments to Experian, one of the big three credit bureaus, at no charge to the tenant or landlord.
In order for a renter to use the Zillow feature, their landlord must be a Zillow Rental Manager user and have agreed to receive payments through the company.
“It aligns with our goal of providing accessibility to building credit in the rental space. It’s a really positive step in that direction,” said Michael Sherman, vice president of rentals at Zillow Group.
While Zillow is the first real estate marketplace to report rental payment data to a credit bureau, it joins a number of different rental reporting services already available to consumers.
There are many services that renters can consider, including some that are free, like Piñata, and others that come with service transaction or processing fees, like Rental Kharma, which charges $8.95 a month after an initial fee installation $75.
There are also services aimed at landlords that offer rent reports for tenants, including ClearNow, Esusu and PayYourRent. Landlords usually cover the cost of these programs, but there may be processing fees depending on how you make your rent payments.
Rent reporting can help the ‘credit invisible’
Nearly 50 million Americans do not have a usable credit score, according to 2022 newsletter from the Office of the Comptroller of the REAch Coin Project or Roundtable for Economic Access and Change.
Being “credit invisible” can affect your ability to qualify for loans and affect the interest rates and terms you are given when you apply for credit.
When rent payments are included on credit reports, consumers see an average increase of nearly 60 points to their credit score, according to TransUnion Report 2021.
Other payment reporting programs such as Experian Boost, StellarFi and UltraFICO have goals similar to those of rental reference services, but with different types of payments. They allow users to build credit based on alternative metrics such as banking and payments for streaming services, electricity bills and mobile phone plans.
Talk to your landlord before signing up for a rent reference service on your own. They may be open to registration as a benefit to their tenants.
Although “people are creatures of habit and don’t always embrace change,” a credit-building feature can help a landlord stand out in a competitive rental market, Schulz said.
“It would be a significant value add; credit building is a big deal, and if you’re someone who can help people build credit, you might be a little bit more interesting to them,” he added.
“Three credit reports are different reports”
Before you sign up with a rental reporting service, it’s important to understand which office or offices the company sends reports to. It may not be worth using a service that only sends rent payment reports to a single office.
“If a rental reporting service only gives your information to one of the [the three big bureaus]and the lender you get your auto loan from uses a different credit bureau, the benefits that could and should come with this tool may not end up being reaped,” Schulz said.
Ideally, the rental reporting company should give the data to Equifax, Experian and TransUnion.
“People hear about three credit bureaus, but they don’t understand that your three credit reports are different reports and different companies report to different bureaus,” Schulz said.