Rent payments could soon be factored into credit scores

July 1st, 2014

Rent payments can now be factored into a credit score calculation.

Apartment renters might finally be able to benefit from on-time payments to their landlord when they apply for mortgages.

Currently, rent payments are not considered in a credit score. Given that these bills are a major monthly expense for renters, months of delivering the check by the due date could be a viable way to boost their credit, which plays a large role in a lender’s decision to grant a mortgage. However, the exclusion means that they have to turn to other sources such as credit cards to establish credit. Other bills, including cable, Internet and cellphone expenses, are also excluded. These payments can be made with a credit card, but then they are noted as on-time payments for one rather than several accounts.

Major and alternative credit bureaus consider rent
The good news is that this could soon change, according to the Columbus Dispatch. TransUnion and Experian, two of the nation’s leading credit reporting bureaus, recently began collecting verified rent payment data. This information can be a part of the calculation of consumers’ credit scores when they apply for a home loan.

“Experian incorporates on-time rental payment data reported to Experian RentBureau into Experian credit reports,” Experian said. “Your rental payment information will be included as part of your standard credit report and may be incorporated into certain credit scores.”

In addition to the big-name reporting services doing their part to help potential homebuyers get approved for financing more easily, alternative credit data firm ECredable.com can provide a printout noting all a consumer’s on-time payments for bills that are not part of a traditional credit score calculation. This information can then be presented to a lenders, and they are required by law to consider it as part of the application.

Long-term benefits are open to consumers
Many first-time homebuyers are only starting to establish credit not long before they apply. Furthermore, some young consumers haven’t established any credit yet, which can bar them from financing of various kinds. While opening a credit card or financing a purchase is a good way to start, these strategies can lead to more credit issues if those cards aren’t used responsibly. Rent payments can now allow consumers to build and improve credit without taking on the risk of another line of debt. As a result, they can continue to spend money on necessities while improving their financial history.