Why Renters Should Report Rent to Credit Bureaus

In a financial climate where a credit score could mean the difference between securing your dream home or not, understanding its impact is crucial. This number is not just an abstract figure; it's a cornerstone of your financial identity—essential when applying for loans, seeking reasonable insurance premiums, and even moving into a new apartment.

The financial repercussions of your credit score are profound, with good credit potentially saving you thousands in interest payments over time. However, a lesser-known facet of credit history is how your past rent payments also might influence your credit score.

While timely rent payments demonstrate financial stability, they often go unreported and unrecognized in building credit history—until now.

This article explores the transformative potential of rent reporting, a practice that could turn your most significant monthly expense into a credit-building opportunity. But it's not a silver bullet; there are caveats and considerations.

Join us as we unpack the pros and cons of incorporating monthly rent payments into your credit report and introduce Azibo's streamlined rent reporting services. This avenue could enhance your credit standing with each rent payment. With the financial landscape evolving, it's time to leverage every payment for your benefit.

The financial impact of credit scores

When landlords, banks, your credit bureau, and card companies alike check your credit score, they are considering your ability to manage debt and make timely payments. For them, this three-digit number is a track record of your ability to borrow money and pay it back within the agreed-upon terms.

Your credit score provides these institutions with insight into your financial past, helping to predict your future actions regarding mortgages and loans, insurance, credit cards, and more. 

Credit scores impact much more than you might realize. It’s common knowledge that having a good credit score can help with routine background checks, like those conducted by a potential landlord. Having a good credit score enables you to make an excellent financial impression on future landlords and credit card companies, as well as mortgage lenders, when you’re ready to purchase a home.

But many overlook the ability of a credit score to save (or cost) you thousands of dollars when you seek a loan for a significant purchase, such as a mortgage for your first house. To offset the risk of working with borrowers whom they deem less desirable, lenders routinely charge applicants with bad credit scores much higher interest rates or require larger down payments.

In a hypothetical example, NerdWallet calculated that a 100-point drop in credit score could increase your mortgage interest rate from 4% to 4.5% — which adds up to an additional $25,300 over 30 years.

What renters should know about credit scores

In an ideal world, borrowers would pay back in full every month, never exceed their credit limit, and promptly deliver each payment. However, this isn’t always achievable. Everyone faces unique circumstances, and some groups have more hurdles to being an “ideal borrower.” 

One of the more common hurdles to having a great credit score is paying rent.  It is the single most considerable monthly expense,  with the average renter in the U.S. spending more than 30% of their income on housing.

However, historically, paying rent did not impact credit scores since it’s technically not a debt paid. Each month, this large payment is effectively invisible to banks, credit card companies, and credit bureaus.

As a result, about 28 million Americans today are “credit invisible," meaning they have no credit history and cannot prove any creditworthiness. Since lenders and landlords both seek applicants with high credit scores, actively building yours can help give you access to financial opportunities.

If you’re renting and want to report your rent to boost your credit score, rent reporting can help you make an excellent financial impression.

What is rent reporting?

Rent reporting is the process of sharing rent payment information with credit bureaus. While you can’t report rent payments to the three credit bureaus by yourself, there are many rent reporting services and tools to help you quickly do so at an affordable rate — especially when you consider the savings you’ll incur by having a higher credit score.

Reporting rent payments can significantly impact your credit score, and major credit bureaus — Equifax, Experian, and TransUnion — will include rent payment records in their credit reports, when this information is provided to them.

In a large-scale Credit Builders Alliance-sponsored pilot program, 97% of participating residents stated that reporting their on-time rent payments was an effective way to build their credit. What’s more, one Experian report suggested that reporting rent payments improved credit scores by up to 29 points.

Who can access rent credit reporting?

Navigating the process of rent credit reporting involves understanding the roles of different parties. Here’s a step-by-step breakdown:

• Tenants: The process starts with you, the renter. To have your rent payments reported, you must opt-in through a service. This is where platforms like Azibo, via their credit boost service, offer easy ways to report your payments to credit bureaus.
• Landlords and property managers: Landlords play a crucial role. They must agree to report their payments or use a service that facilitates this reporting. Landlords can benefit, too, as consistent reporting encourages timely rent payments.
• Third-party rent reporting services: Companies like Azibo specialize in recording and reporting your rent payments to credit bureaus. These services bridge the gap between your rent payments and your credit report, ensuring your financial diligence is recognized.
• Credit bureaus: The major credit bureaus – Equifax, Experian, and TransUnion – receive your rent payment data from rent reporting services. However, not all credit bureaus treat this information the same, and the impact on your credit score can vary.
• Credit score models: Certain credit scoring models, including newer ones like FICO 9 and VantageScore, incorporate rental payment data if reported. This inclusion can positively impact your credit score, reflecting your financial responsibility.
• Creditors and lenders: Potential lenders will review your credit report when applying for credit. A history of timely rent payments can improve their perception of your creditworthiness, potentially influencing their decision.
• Consumer reporting agencies: Specialized agencies may also provide rental payment histories, which can be accessed by landlords during tenant screenings. This highlights the importance of maintaining a positive rent payment record.

By understanding each party's role in rent credit reporting, tenants can better navigate the process and leverage their past rent payments to build a stronger credit profile.

Pros to credit reporting for rent

Credit reporting for rent presents a unique opportunity for renters to contribute positively to their credit history. By including timely rent payments in a credit report, tenants who previously may have had little to no credit history can establish and build credit over time, which can be particularly beneficial for young adults or immigrants who haven't had the chance to utilize traditional forms of credit.

For those who already have existing credit histories, the addition of rental payments can further improve their credit scores, potentially leading to a more favorable borrowing landscape. This enhanced credit standing can translate into tangible benefits, such as lower interest rates on loans and credit cards, as well as improved access to various forms of credit.

Moreover, a solid track record of financial responsibility, evidenced by consistent rent payments, can be a valuable asset when applying for housing in the future. It can also lead to financial perks like lower security deposits required by landlords or utility companies.

Cons to credit reporting for rent

On the flip side, credit reporting for rent has drawbacks. The main concern is that while on-time payments can bolster a credit score, late or missed payments can equally damage it, leaving a negative mark on the tenant's credit report.

Such negative entries can take a considerable time to rectify and may have lasting consequences. Additionally, reporting rent to credit agencies introduces the possibility of errors in one's credit report.

These discrepancies can be a hassle to correct, often requiring significant time and effort to dispute with credit bureaus. Privacy can also become a concern as renters have their payment histories more widely accessible to entities performing credit checks, which can be discomforting for those who value their financial privacy.

Furthermore, using third-party services for most rent reporting services often comes with additional fees, which can be an extra financial burden on tenants or landlords who might have to absorb these costs. Lastly, the impact of using rent reporting services can be somewhat inconsistent; not all credit scoring models account for rent payments, and not all lenders consider them in their risk assessment, potentially diminishing the overall advantages of having rent payments reported.

How to report rent to credit bureaus with Azibo

If you’re looking for a way to report your rental payments to credit bureaus, Azibo is here to help. With the addition of Azibo Credit Boost, renters can pay their rent and report their on-time payments together on one platform.

Azibo Credit Boost offers a 2-month free trial ($4.99 monthly after trial expiration) to report your payments to major credit bureaus — Equifax and TransUnion. To get started, simply log into your Azibo account and choose your payment plan.

Azibo Credit Boost will begin reporting your on-time rent payments, and you'll be well on your way to building and improving your credit score. If you’re not already paying rent through Azibo, send your landlord an invite today.

Does paying rent build credit?

We've explored the facets of rent reporting, from its benefits to its drawbacks, and it becomes clear that education and careful consideration are essential. For those ready to harness the potential of rent reporting, services like Azibo offer a streamlined, user-friendly platform to bridge the gap between rent payments and credit building.

By opting into rent reporting, tenants and landlords can contribute to a more accurate and comprehensive picture of financial reliability.

As the financial landscape continues to evolve, so must our strategies for building and maintaining credit. Rent reporting emerges as a significant development—one that acknowledges the full spectrum of financial responsibility and provides a means for many to prove their creditworthiness.

With thoughtful implementation and a clear understanding of its impact, rent reporting can become a valuable asset in the financial toolkit of renters across the nation.

Report rent to credit bureaus FAQs

Is it worth it to report rent to credit?

Yes, it's often worth it, as timely rent payments can help build your credit history, especially if you have a limited credit history or background.

Can I report rent payments to credit?

Yes, you can report rent payments to credit bureaus through third-party rent reporting services or rent payment platforms that offer this feature.

How do I add rent and utilities to my credit report?

To add rent, sign up with a rent reporting service that reports to credit bureaus. For utilities, some credit scoring models include utility payment history if these payments are reported through specific platforms or programs.