Learn how rent reporting can improve your credit by sharing on-time rent payments with credit bureaus.
Nearly half of Americans have poor or no credit scores, largely preventing them from gaining access to lending, housing or other financial opportunities — and ultimately impeding their ability to build wealth. But many consumers don’t realize that rent reporting — or sending a record of monthly rent payments to credit bureaus — is a simple way to establish or build credit.
In this article, we’ll share basic details about credit scores and how renters can use Azibo's rent reporting tool to report on-time rent payments and boost their credit score.
When landlords, banks, and credit card companies alike check your credit score, they’re wondering whether you’re able to manage debt and make on-time 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. To these institutions, a glimpse into your financial past can help predict your future actions when it comes to 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 helps you make a good financial impression on future landlords and credit card companies, as well as mortgage lenders when you’re ready to purchase a home.
But did you know that your credit score can also save (or cost) you thousands of dollars when you seek a loan for a major purchase, such as a mortgage for your first house? To offset the risk of working with borrowers who 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.
In an ideal world, borrowers would pay back in full every month, never go over 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 having to pay rent. For tenants, rent is the single largest monthly expense, often encompassing 30% to 50% of a household’s total income. However, historically, paying rent did not have an impact on 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 26 million Americans today are “credit invisible," meaning they have no credit history and are therefore unable to 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 boost your credit score, rent reporting can help you make a good financial impression.
Rent reporting is the process of sharing your history of on-time rent payments with credit bureaus. While you can’t report rent payments to the credit bureaus yourself, there are rent reporting tools to help you easily do so at an affordable rate — especially when you consider the savings you’ll incur by having a higher credit score. In fact, the three major credit bureaus (Equifax, Experian, and TransUnion) will all include rent payment records in their credit reports, if they receive it.
Reporting your rent payments can have a significant impact on your credit score. 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 for them to build their credit. What’s more, one Experian report suggested that reporting rent payments improved credit scores by up to 29 points.
If you’re interested in reporting rent payments to credit bureaus, Azibo is here to help. With Azibo's new Credit Boost feature, renters who pay rent through Azibo can now report their on-time payments to credit bureaus in the same platform. For a limited time, start a 3-month free trial (then $4.99 per month) and Azibo will report your payments to the three major credit bureaus — Equifax, Experian, and TransUnion.
To get started, simply log into your Azibo account and choose your payment plan. Azibo will begin reporting your rent payments and you'll be on your way to improving your credit score.
Choose from flexible payment methods including credit card, debit card, or ACH bank transfer.
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This article and the Azibo Blog in general is intended for informational and educational purposes only. It is not investment, tax, financial planning, legal, or real estate advice. Please consult your own experts for advice in these areas. Azibo provides information believed to be accurate, but Azibo makes no representations or warranties about the accuracy or completeness of the information contained on this article or blog.