Having a good credit score is an important component of financial health. It can affect the rate you receive on a loan, or if you receive the loan at all. Making timely credit card payments, being listed as an authorized user, or obtaining a secured credit card are some ways to build your credit. What if you could also benefit from simply paying your rent on time?

Mortgage and auto payments are automatically reported to credit agencies, but rental payments are not. New services, however, are making it easier than ever to report this information. If your landlord gives you the option to report your rental payments to the three (3) credit agencies - should you opt-in?

Who could benefit from reporting their rental payments?

Rental payment data alone is not going to drastically improve someone’s credit score. The most commonly used FICO® score does not currently include rental payments in its calculation, but the FICO® 9, FICO® 10, and VantageScore do. Rental payments will, however, be listed on every credit bureau’s full credit report as a separate “tradeline”.

For someone who has good credit with multiple tradelines, such as a credit card or auto loan, reporting rental data likely won’t make a big difference. Others, such as those that have limited assets or credit histories, could go from having unscorable credit to a good score with the inclusion of rental payments. Examples might include a recent graduate with student debt or a low-income family that doesn’t have a car loan or credit card.

The Role of Landlords in Reporting Rental Payments

There is no requirement for a landlord to report rental payments, but it is something they may consider given the benefits - better data for the next landlord and rewarding the timely tenant. For people in California, their state just passed SB1157 which requires certain landlords of subsidized housing to offer to report a tenant’s rental payments to a credit bureau.

Many landlords and property managers already use a rent payment service to charge and collect rents. Now they can choose a service, such as eRentPayment, Zego™ Pay LevelCredit Reporting, Esusu, and Rentler, that offers the ability to also report rental payments to the credit bureaus. Some include this service as part of their standard fee and others charge a separate fee that can be paid by the tenant, the landlord, or split between both.

Should you opt-in?

If your landlord offers to report your rents for free, consider opting in. You have nothing to lose and it will provide a future landlord or lender a more complete picture of your credit history.

If there is a charge, weigh your options. It is likely not worth it if you already have good credit without the rental data. If you don’t have good credit, it is something to evaluate along with other, perhaps cheaper ways to build your credit, such as being an authorized user on someone else’s card or obtaining a secured credit card.

Regardless of whether you opt-in or not, missed rental payments are typically reported to a collections agency which gets reported to the credit bureaus, negatively impacting your credit. So opting out doesn’t let you completely fly under the radar - it is just removing any potential benefit you may receive from not missing a payment.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning and ongoing impact-focused investment management in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.