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While rent payments do not traditionally affect your credit, a growing number of so-called rent-reporting services are trying to change that.
These services track users’ rent-paying habits and report them to one or more of the big credit bureaus — Equifax, Experian and TransUnion — with the aim of helping renters build credit and potentially boost their credit score.
But these services don’t all operate the same way, and some may have less value for renters. There’s one major detail you should consider before signing up, said Matt Schulz, chief credit analyst at LendingTree: Is your payment record going to all three bureaus?
“It’s important for people to understand that you don’t just have one credit score,” he said. “You just don’t know which bureau your lender is going to use to get your information.”
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This week, real estate site Zillow Group launched a new rent payment reporting feature. Renters who pay through the site can now opt in to have their on-time rent payments reported to Experian, one of the three major credit bureaus, at no charge to the renter or landlord.
In order for a renter to use the Zillow feature, their landlord must be a user of Zillow Rental Manager and have agreed to receive payments through the firm.
“It aligns with our goal of providing accessibility to building credit in the rental space. It’s a really positive step in that direction,” said Michael Sherman, the vice president of rentals at Zillow Group.
While Zillow is the first real estate marketplace to report rental payment data to a credit bureau, it joins a host of different rent-reporting services already available for consumers.
There are many services renters can look into, including some that are free, such as Piñata, and others that come with service or processing transaction fees, such as Rental Kharma, which charges $8.95 a month after an initial set-up fee of $75.
There are also services geared to landlords that offer rent reporting for tenants, including ClearNow, Esusu and PayYourRent. Landlords usually shoulder the cost of these programs, but there may be processing fees depending on how you make your rent payments.
Nearly 50 million Americans have no usable credit scores, according to a 2022 fact sheet from the Office of the Comptroller of the Currency’s Project REACh, or Roundtable for Economic Access and Change.
Being “credit invisible” can affect your ability to qualify for loans and affect the interest rates and terms you are given when you apply for credit.
When rent payments are included in credit reports, consumers see an average increase of nearly 60 points to their credit score, according to a 2021 TransUnion report.
Other payment reporting programs such as Experian Boost, StellarFi and UltraFICO have aims similar to those of rent-reporting services, but with different kinds of payments. They allow users to build credit based on alternative metrics such as banking activity and payments for streaming services, electric bills and mobile phone plans.
Talk to your landlord before you sign up for a rent-reporting service on your own. They may be open to signing up as a benefit to their tenants.
While “people are creatures of habit and don’t always embrace change,” a credit building feature can help a landlord stand out in a competitive rental market, said Schulz.
“It would be significant added value; building credit is a big deal and if you are somebody who can help people build credit, you may be a little more interesting to them,” he added.
Before you sign up to a rent-reporting service, it’s important to understand which bureau or bureaus the company sends reports to. It may not be worth using a service that sends rent payment reports only to a single bureau.
“If a rent-reporting service only gives your information to one of [the three big bureaus], and the lender that you are getting your auto loan from uses a different credit bureau, the benefits that could and should come with that tool may not end up panning out,” said Schulz.
The ideal is that the rent-reporting company gives the data to Equifax, Experian and TransUnion.
“People hear about three credit bureaus, but they don’t understand that your three credit reports are different reports, and different companies report to different bureaus,” said Schulz.