As anyone who has ever signed a lease knows, renting an apartment requires on-time, regular monthly payments. But unlike mortgages and car loans, those payments rarely appear on a credit report and won’t lift your credit score — that is, unless you enlist the help of rental reporting services. These services report your rental payments to some or all of the major credit agencies, for a fee that could range from a few dollars to up to $100 per month. Although more unconventional than the typical methods of building credit — like installment loans and credit cards — rental reporting services are nonetheless growing in popularity.
There are a number of different rental reporting services available, and the fees and enrollment procedures vary for each one. In some cases, you as the renter will be the applicant; other services may require your landlord or property manager to sign up. Whichever type of service you choose, make sure the benefits justify the additional expense. Here are some of the top ways a rental reporting service can help you.
It Boosts Your Credit Profile
You won’t see as much change to your credit score as you would by opening a credit card and making regular payments on it. Even still, when you’re trying to improve your credit standing, even just a few extra points here and there will help your cause — and it is certainly possible to enhance your credit rating with a pattern of on-time rental payments. In turn, these records may allow you to qualify for credit card offers or loans that might otherwise be outside your reach.
It Builds a Longer History
The length of your credit history is one critical factor in your credit score calculation. If your history is particularly scant, you may want to consider a service that offers to certify past rental payments. That’ll provide a longer history of payments — and the longer and more positive your history, the more your credit score stands to benefit.
Change Can Happen Fairly Quickly
Once you sign on with a rental reporting service, you can generally expect to see your rental payments start showing up on your credit report within a couple of months. Some services may take longer, such as ClearNow, which requires four on-time payments before it’ll begin submitting them to the credit bureaus. As far as the credit-building process is concerned, that is a fairly swift turnaround. If you have a specific time-sensitive goal in mind, such as qualifying for a loan, this can help you build a positive history in your credit report in a relatively short amount of time.
It Enhances Future Renting Prospects
If you rent in the future, you will be able to easily provide a record of documented, timely payments to potential landlords. References from other landlords can be helpful, but concrete evidence of on-time payments will most definitely give you an edge — even if your credit history is relatively limited.
It Encourages On-time Payments
If you know that a rental reporting service is going to send your payments to the credit agency, you’re much less likely to slack off on payments. Keep in mind that you’ll need to be even more vigilant than usual that you’re paying on time. Some services facilitate the payment process by offering to deduct the payments automatically from your bank account. That’s one benefit worth taking up to your landlord — who might even decide to take on the cost of the rent reporting service if it will guarantee timely electronic deposits.
The Downside
Although using a rental reporting service will get your rent payments to appear on your credit report, they might not be calculated as part of your credit score. Not all credit scoring models, especially the more established, older ones, will consider rent payments, even those reported to the major bureaus. However, some credit cards do cater to those whose rental history is listed on their credit report, so it’s worth doing your research to find the best offers available. Cost of the service is another concern. Your best bet is to seek out a budget-friendly option that reports to all of the credit bureaus — and will certify past payments, if possible — which gives you the best chance of increasing your score.
If you’re weighing whether to sign up with a rental reporting service or you’re looking for an additional way to boost your credit profile, you already know that every little bit helps. At Ovation Credit, we specialize in helping consumers target the inaccuracies that may be dragging down their credit score. Check out our free consultation, and with our assistance, you may be able to dispute some of these errors and improve your score.
