Your credit impacts your ability to borrow money and the interest rates you receive on loans and credit.
There can be misconceptions about whether paying rent can affect credit. It can help build credit, but only if your landlord or property management company reports it to the credit bureaus.
Let’s look at the process of reporting rent, its potential effects on your credit and the benefits and drawbacks of rent-reporting programs.
How to report rent payments to credit bureaus
In most cases, rent payments are not automatically reported to the credit bureaus. However, all 3 major credit bureaus will include rent payment information in credit reports if they receive it.
There are typically 2 choices for reporting rental payments: rental reporting programs you as a tenant sign up for and landlord-only reporting services. First, check if your landlord or property management company already uses a rent-reporting service. If not, you can choose a rent-reporting service that suits your needs.
When you sign up for one of these services, it will document and report your rental history to 1, 2 or all 3 credit bureaus. You’ll typically need to provide documentation such as proof of your rental agreement and payment history, verify your identity and provide contact information for your landlord. Rent-reporting services may share information about leases you’ve signed, on-time rent payments, bad check history and outstanding balances or rental debts with the credit bureaus.
How can renting an apartment impact your credit?
Paying rent generally does not help or hurt your credit unless your payment history is reported to the credit bureaus through a rent-reporting service.
When you use a rental reporting service, on-time payments can help build a positive credit history, as payment history makes up a considerable part of your credit score. On the other hand, late or missed payments can negatively impact your credit. Keep in mind that in most cases, either you or your landlord must subscribe to the service for your payment history to be reported.
Tips for managing rent payments to avoid negative credit impacts
Staying on top of rent payments is critical, especially when you’re enrolled in a rent-reporting program. To avoid missed payments and help maintain positive credit, consider:
- Setting up automatic payments: Arrange for automatic withdrawals from your bank account each month to help you avoid missing a due date.
- Creating payment reminders: Set up a reminder on your phone or calendar to stay on top of upcoming due dates.
- Reviewing your budget regularly: A well-planned budget is essential to help avoid missed payments.
- Consider a rent-reporting service with a grace period: Some rent-reporting services offer grace periods or provide options for only reporting positive payments. Choose a service that offers flexible options to help reduce the chance of negative credit impact.
Understanding the role of payment history in credit scores
Payment history is a critical factor in maintaining a strong credit score. Consistent, on-time payments show you’re a reliable borrower, which can positively impact your overall credit profile over time. On the other hand, late or missed payments can be damaging to your creditworthiness, and the negative mark can stay on your credit history for up to 7 years.
Additional benefits of reporting rent payments
In addition to potentially boosting your credit score, reporting rent payments can offer other advantages:
- If you’re planning to move to a new rental property, having a positive rental history on your credit report may improve your chances of approval for a new lease. Many landlords may look favorably on applicants with a reliable history of payments as it suggests they’re less likely to miss future payments.
- A positive rental history may also enhance your negotiation power when your lease is up or when you are trying to rent another property. You may be able to secure a lower deposit rate or a better lease term.
Is reporting rent worth it?
While paying rent will likely not impact your credit automatically, reporting your rental payment history may help you build credit over time. A positive rental payment history may be advantageous for future rental applications, as this show landlords you’re reliable.
If you’re new to building credit, reporting your rent could also help you establish a credit history. If you already have strong credit, reporting a positive rental payment history may further boost your creditworthiness.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
