Does Paying Rent Build Credit? 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 important. 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 home.

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. When you pay rent on time, it shows financial responsibility, and these payments can be added to a person’s credit file to help build credit, providing lenders with a more comprehensive view of financial responsibility.

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.

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.

Reporting rental history can positively impact credit scores and be used as a factor in mortgage decisions.

As a result, about 26 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.

Does paying rent build credit?

So, can paying rent help build your credit? The short answer is no—not by simply making payments. However, it can improve your credit history and scores if the reported rental payments are sent to the credit bureaus. This doesn’t happen automatically.

To ensure your on-time payments are reflected on your credit reports, you’ll need to sign up for a reporting service. These services typically come with a monthly fee. For instance, Azibo offers a ‘Credit Boost’ service for $4.99 per month. Even better, Azibo gives you two months free if you invite your landlord to set up an account!

Check out Azibo Credit Boost here

What is rent reporting?

Now that we’ve established that rent reporting services can help build your credit, let’s discuss what rent reporting actually entails.

Rent reporting is the process of sharing your rent payment information with credit bureaus. This can boost your credit score by including your rental payment history in your credit report. You can’t report rent payments to the three major credit bureaus—Equifax, Experian, and TransUnion—on your own.

However, various rent reporting services can do this for you quickly and affordably by reporting your rental payment history to all three credit bureaus. The cost is often outweighed by the benefits of a higher credit score.

Reporting rent payments can significantly impact your credit score. In a large-scale pilot program sponsored by the Credit Builders Alliance, 97% of participants found that reporting their on-time rent payments effectively built their credit. Additionally, an Experian report indicated that this practice could improve credit scores by up to 29 points.

Pros to credit reporting for rent

Credit reporting for rent offers renters a unique chance to positively impact their credit history. By including timely rent payments in their credit reports, tenants with little to no credit history—such as young adults or immigrants—can establish and build credit over time.

For those with existing credit histories, adding rental payments can further boost their credit scores, potentially leading to better borrowing conditions. This improved credit standing can result in benefits like lower interest rates on loans and credit cards, and enhanced access to various forms of credit.

Additionally, a strong record of consistent rent payments demonstrates financial responsibility, which can be advantageous when applying for future housing. It may also result in financial perks, such as lower security deposits required by landlords or utility companies.

Cons to credit reporting for rent

While credit reporting for rent has benefits, there are also drawbacks. The main concern is that while on-time payments can boost a credit score, late or missed payments can harm it, leaving a negative mark on the tenant's credit report. These negative entries can take a long time to rectify and may have lasting consequences.

Additionally, reporting rent to credit agencies can introduce errors into one's credit report. Correcting these discrepancies can be time-consuming and require significant effort to dispute with credit bureaus. Privacy is another concern, as renters' payment histories become more accessible to entities performing credit checks, which can be discomforting for those who value their financial privacy.

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

How to report rent to credit bureaus with Azibo

As mentioned earlier, 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.

Alternative ways to build credit while renting

In addition to rent reporting, there are also many other ways you can continue building your credit. Let’s take a look:

• Secured credit cards: While renting, you can use a secured credit card where you make a deposit that acts as your credit limit. Making timely payments on this card helps build your credit score.
• Credit builder loans: Take out a small loan from a credit union or bank specifically designed to help build credit. Repayments are reported to credit bureaus, boosting your credit history while you rent.
• Authorized user: Become an authorized user on someone else’s credit card. If they have good credit and a history of on-time payments, this can positively impact your credit score while you’re renting.
• Personal loans: Apply for a small personal loan and make timely payments. These payments are reported to credit bureaus and can help improve your credit score during your rental period.
• Store credit cards: Get a store credit card and make regular purchases, ensuring you pay off the balance each month. This can help build your credit if managed responsibly, even while renting.
• Report utility payments: Some services allow you to report utility and phone payments to credit bureaus, adding another positive payment history to your credit report while you rent.
• Peer-to-peer lending: Use peer-to-peer lending platforms to obtain a small loan and make timely repayments. These platforms often report to credit bureaus, aiding in credit building while you’re renting.
• Credit union memberships: Join a credit union that offers credit-building products like share-secured loans or credit-builder loans, which are designed to help members improve their credit while renting.

Rent reporting-- increase your credit score with the rent you're already paying

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 paying rent good for credit score?

Paying rent can be good for your credit score if your rent payments are reported to the credit bureaus. Using a rent reporting service, on-time rent payments can positively impact your credit history and credit report.

How do I use my rent to build credit?

To use your rent to build credit, you need to sign up for a rent reporting service. These services report your on-time rent payments to the three major credit bureaus, helping to boost your credit score over time.

Will paying utilities build credit?

Paying utilities typically does not build credit because utility companies do not report payments to credit bureaus. However, some services can report utility payments to the credit bureaus for you, which can help improve your credit file and credit scores.