If you mess up financially, or even make a tiny mistake, you can usually bet it will lower your credit score. However, if you’re doing everything you should and being financially responsible, that doesn’t always mean your credit score will increase.
It’s unfair, but building credit usually requires some knowledge of how credit scores are calculated and active and intentional financial decisions based on that knowledge. For example, being so responsible with your money that you don’t need a credit card won’t help your credit at all, but taking out a credit card you don’t need, using it for regular purchases, and paying it off each month will.
This is especially true for renters. Missing a rent payment, getting sent to collections, or getting evicted will almost certainly affect your credit. However, paying your rent on time likely won’t. That’s because your rent payments aren’t automatically reported to the major credit bureaus.
What is rent reporting?
Rent reporting is when your rental manager or a third party service reports your rent payments to credit bureaus for you. This third party service can be a rent reporting service that charges a monthly fee, or it can be a portal through which you pay your rent that offers rent reporting and may or may not charge a fee. Examples include Rent Reporters, RentTrack, PayYourRent, ClearNow, and ERentPayment.
If you have rent reporting, it means that the credit bureaus being reported to are tracking your on-time payments and taking them into consideration when they calculate your credit score. So, as long as you never pay late, rent reporting will increase your credit score.
Why you should sign up for rent reporting
Rent reporting is a great, easy way to build your credit score by simply paying your rent on time. While there are loans and credit cards specifically designed to help you build credit, it doesn’t hurt to add on-time rental payments into the mix as well.
This is a great option for people who don’t plan on buying a home anytime soon. It allows their rent payments to still have a positive impact on their credit profile. It’s also a way to build a little credit for people who don’t have any, although taking out a credit building loan or secured credit card will still be necessary to build a substantial amount of credit.
Another benefit of rent reporting is having an official record of your on-time rent payments. If you ever plan to rent again, this can be very beneficial. Landlords almost always want to see a good rental history, and relying on references from old landlords isn’t always the most credible way to vouch for a new renter. This is especially true if you have no or low credit and are having trouble finding a place that will rent to you — showing them a record of on-time rental payments will help convince them.
The drawbacks of rent reporting