Does Paying Rent Build Credit?

Michael Collins
Jan 11, 2021

Does paying rent build credit? Normally paying your rent won’t affect your credit score. However, if your landlord reports your successful payments to the three credit bureaus, your credit score can improve over time. 

Rent and Credit 

If you rent your house or apartment like so many Americans do, rent payments make up a large portion of your monthly expenses. As such, it can sometimes be hard to scrap the money together and make ends meet to pay off your rent. However, despite the work it takes to make rent every month paying your rent does not necessarily increase your credit score. Since other big expenses like loan payments build your credit, shouldn’t rent payments increase your credit score as well? 

Why Building Credit History is Important

Building your credit is one of the most important parts of personal finances. With good credit, you have access to much more and much better loans and credit cards among other things. Likewise, if you have good credit you will save a lot of money by having access to better rates when it comes to your mortgage, auto loan, car insurance, and many other things. Should you ever be in a jam financially, you will have a much easier time finding a helpful loan if you have a good credit score. 

Your credit score is calculated using 5 different factors that are all differently weighted. The factors are your payment history, credit utilization, length of credit history, credit mix, and new credit. Your payment history is the most important of these factors as it makes up 35% of your credit score. In other words, if you have been consistently making loan and timely credit card payments successfully, you will have a strong credit score as a result. If you are always missing payments here and there, your credit score will conversely take a large hit as a result. 

As you can see, having a long history of credit and loan payments is integral to a good credit score. If you have a 30 year mortgage where you are making  timely payments monthly and you successfully make payments for years, you will have a good credit score as a result. Similarly, renting requires you to make monthly payments and you could be making payments for years until you buy a place. Having rent payments be added to your credit history can be huge for your overall creditworthiness. However, rent payments are not automatically on your credit report. Let’s take a look at why this is the case and what you can do about it. 

Why Does Paying Rent not Automatically Build Credit?

Did you know that loan lenders are not legally required to report to the three main credit bureaus? While it may seem like every time you make or have a late  payment it affects your credit score, that is because most lenders report payments to incentivize making payments and discourage missing payments. In reality, they are not required at all to report your payments and they may even skip reporting your payments (which can hurt you). Nothing is keeping your loan company or credit card provider from simply not reporting your good payments. 

This is the case with landlords. Like lenders, landlords are also not required to report your rent payments. While it is mostly commonplace for credit card companies and loan lenders to report their customers’ payments to the bureaus, this is not necessarily true for landlords. Unlike lenders and credit card providers, landlords don’t exactly need to incentivise rent payment. Missing a loan or credit card payment means your credit score will drop and you will have to pay additional money in fees or interest. Missing rent means you could be evicted from your home or apartment which is obviously comparatively worse than a hit to your credit score. Whatever the reason is, the majority of landlords will not report your payment unless they are prompted to. 

How to Get Your Landlord to Report Rent Payments

Getting your landlord to report your rent payments is not as hard as you would think. In fact, it is actually very easy to do. All you need to do is contact your landlord and ask that they report your rent payments to the 3 major credit bureaus. If they agree, then they will report to the bureaus every single time that you make a payment. 

This is the same with loan lenders and credit card providers. If these lenders are not reporting your payments, simply ask them if they would be willing to report your payments to the credit bureaus. Landlords and lenders should be willing to report your payments if you ask them nicely. Being a lender and a landlord is a business, and as such, many landlords and lenders and credit card providers will do their best to keep their customers. 

Remember that landlords are not legally obligated to report your payments. They can very easily say no to your request of rent reporting if they do not see any value in it. Likewise, they can also stop reporting your payments at any time if they see you are not living up to your end of the bargain and are being a bad tenant. While we all may not have the best relationship with our landlords, try your best to appease them and to ask kindly if you hope to have your rent payments reported so that your credit score can increase. 

To make this process easier for landlords, some landlords may use services that allow tenants rent payments to automatically be sent to the credit bureaus. Some of these are free, but some of these are not and may cost you money if your landlord is not willing to pay. Likewise, there are services you can use independently of your landlord if your landlord is unwilling to report your rent payments. Unfortunately, none of these are free and can actually come with some hefty prices. If you are willing to cough up the money, then using one of these services could really help your credit score. If you are understandably not willing to pay money for one of these services, you may be out of luck if you are unable to convince your landlord to report your payments on their own. 

Why You Should Have Your Landlord Report Rent Payments

Think about your rent for a moment. Think of how much you have shelled out over the years to make sure you have a roof over your head. Think of how many rent payments you have made over the years. Chances are, you have paid a lot of money over the years towards your rent and you have been consistently making payments since you began renting! Paying your rent consistently for so long takes a lot of dedication and hard earned money and you should be compensated for it! 

Unless you plan to buy a residence in the near future, you will likely be making a recurring payment for rent for a long time to come. With no plans to make a purchase, you are probably making 12 rental payments a year for the foreseeable future. Every single one of those payments that you will be making is a payment that could go towards building your credit history. Just think of the wonders years of successful rent payment history could do for your credit score as a whole! If you don’t make an effort to get your landlord to report these payments, you will be missing out on an opportunity to really build your creditworthiness which can save you from a lot of pain down the road. 

However, it is very important to note that having your landlord report your rent payments means that they will report both your successful payments as well as your unsuccessful ones. For as much as making a rent payment successfully can help your payment history and credit score, so too can a missed payment hurt your credit score. If you are someone who isn’t perfect with making each rent payment on time, your credit score could take a big hit as a result. Before you ask your landlord to report your payments, weigh the pros and cons of it and really ask yourself if you will be committed to making your rent payments successfully. 

How to Make Sure Your Rent is Reported

Every year, you get one free credit report from each credit bureau - Experian, TransUnion, and Equifax. So each year, you can check your credit report about 3 times for free, and a few additional times if you are willing to pay. You can use these free credit reports to see if your rent is being reported. 

To make sure your rent is being reported correctly, simply get one of these free credit reports from the credit bureaus and take a look at it. If you see your rent payments being reported there, you know your landlord is doing a good job or reporting them. If not, you know that your landlord has either not reported them or is only reporting them sporadically. If you think that your landlord is reporting them but they aren’t showing up on your credit report, contact your landlord and the credit bureaus to dispute potential inaccuracies. 

Does Applying for an Apartment or Home Hurt my Credit Score?

Applying to rent out an apartment or home pay or may not hurt your credit score depending on your lender. Why do lenders even check your credit score anyway? Well, like loans and credit card companies, landlords want to check your credit history and your creditworthiness to see if they think you will be consistent with making your payments (i.e. your rental payment history). If they deem that you are unreliable, they may not approve your rent application. 

When landlords pull a credit check on you, it falls under one of two categories; a soft or hard inquiry. A soft inquiry has no impact on your credit score, while a hard inquiry can knock about 5-10 points off of your credit score per inquiry. If your landlord does not check your credit history or does a credit pull through a service that uses soft inquiries, your credit score will not be hurt. If your landlord checks your credit report like the typical lender or credit card company does, it will be a hard inquiry and may lose some points.  

Fortunately, multiple inquiries from rent applications count as a single inquiry as long as they are in the same timeframe, according to FICO. Hard inquiries also do not take too much off of your credit score and they disappear after some time, so be conscious of them but do not overstress about them. 

Another Way to Build Credit History: Possible Finance

If you are having some troubles getting your landlord to report your rent payments, you should consider getting a credit builder loan with Possible Finance. 

Possible offers small loans of up to $500 dollars that build your credit history and boost your credit score when you successfully pay them back. Unlike many of our competitors, our loans are much easier to pay off. Our loans are installment loans which are paid back in a series of four equal payments over a period of a month, instead of having to be paid back in one week like many others. If you are struggling with your payments, you can extend your payment up to 29 days right within our easy to use app. 

At Possible, we have placed ourselves right in the middle of an industry that is known to be predatory towards its customers and does little to build value for them. We see this as a huge injustice and strive to bring financial fairness to our customers that really need it. Instead of pushing our customers down a series of difficult debts like traditional payday loan lenders do, we not only want to help our customers in a time of need, but we want to build value for them as well. We created our credit builder loans to do just that.
Want to build credit history? Think you want to get a loan with Possible? Download our app and get started!

Michael Collins

Michael has a passion for writing and has since brought that passion to Possible. He enjoys reading everything there is to know about film, sports, and finance. His studies in college allow him to be on the forefront of business knowledge so he can better inform his readers.

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