Purchasing a Home Soon? Paying Your Rent on Time Might Land You a Lower Mortgage Rate

If you’re renting but planning to buy a house in the next year, there’s some good news if you pay your rent on time. Fannie Mae and the credit bureaus (TransUnion, Equifax, and Experian) have decided to add rental payment history to make it easier for consumers to build a credit file. Let’s discuss the details.

You Cannot Self-Report

While it would be nice if consumers could contact the bureaus directly and get their on-time rent payments logged into their credit file, that’s not how it works. The rental payment history needs to come from a third party, such as your landlord or a rental service company.

Ways to Get Your Rental Payment History Added to Your Credit File

  • Ask Your Landlord
    If you’ve been a good tenant who’s paid on time for years, ask your landlord to do you a favor and report the positive payment history to the bureaus. While they may hate to see you moving out, most property managers will report it because it’s cost-effective and easy to do. It’s worth asking to see if they will.
  • Hire a Rental Service Company
    There are several online rental service companies that will report your payment history to the credit bureaus. Some of them charge you a subscription fee for their services, while others charge an enrollment fee and a small monthly service charge. Keep in mind that your landlord may need to verify the information before it’s reported to the bureaus. Some of the more economical ones to use are Esusu Rent, Rock the Score, Rental Kharma, and LevelCredit.

Other Things to Know about Using Rental History to Build Your Credit

  • Some rental service companies will add up to a 24-month history of your rental payments. This is beneficial, since part of your credit score is built from length of credit history.
  • It pays to find out which credit bureaus a rental service company reports to. Some report to all three, which is the best case, while others only report to one.
  • It will take a bit of time for your rental history to show up and affect your credit score. Give the information at least 30 days to cycle through before expecting to see any changes.

Managing your credit file is an important part of your financial life. Building and maintaining a good credit score takes some work, but it empowers you to qualify for a variety of loans, not just a home loan for bad credit. If you’ve been paying your rent on time for several months or years, make sure that positive history gets factored into your credit file so you can benefit from it when you start your homebuying process.