Normally when I write about credit I do so in a very matter-of-fact manner. Here are the facts, A…B…C. I’m going to change it up for this article. For this one, I’m going to weave in a story with some credit industry facts. And, that combination is going to answer the following question. Can rent reporting really help my credit?
Here goes the story. Over the last few years consumer advocacy groups and political types have become increasingly vocal in their complaints about the consumer credit system in the United States. I’ll save you the details but safe to say they find almost everything about it to be unfair. Among their many complaints is this; they believe there are obligations consumers pay each month which are not benefiting their credit reports or scores. Rent is one of those obligations.
When you look at your credit reports you’re going to notice that most, if not all, of the information is being reported or “furnished” by lenders, loan servicers, or debt collectors. The chances of your rent being on your credit reports, organically, is very low. Meaning, unless you’ve paid a service to add your rent to your credit reports, it’s likely not there.
Here goes the facts. The process of credit reporting is 100% voluntary. As in, you cannot force any bank or credit card issuer, or credit union to report your information to any credit bureau. Likewise, you cannot force any apartment complex, landlord, or property management company to report anything about you either.
Further, the minute a company starts furnishing information to one or more of the credit bureaus they must comply with the Fair Credit Reporting Act’s various obligations. This includes implementing procedures to ensure accuracy, and to also perform the dispute/investigation process should they receive credit disputes, which they will. It also means they’ll have to pay lawyers to defend the inevitable FCRA lawsuits that will be filed against them, many of which will be bogus shakedowns. All of this is expensive and time-consuming. And, if a company can avoid these costs…who can blame them.
Finally, you have no right to credit reporting. As in, there is no law anywhere that forces the credit bureaus to maintain a report on you or forces any company to report information about you to a credit bureau.
The answer to the question about whether or not rental reporting can help your credit reports and credit scores is “maybe, maybe not.” To the extent the cosmetic presence of a rental tradeline on your credit reports causes a lender to look more favorably on your credit risk, that’s great. But, it’s also not guaranteed because most lenders don’t actually stare at credit reports any longer. They leave that task up to their automated underwriting systems.
From a scoring perspective, of the various generations of FICO® branded scores, only FICO 9 and FICO 10 consider rental tradelines in the scoring process. That means all FICO scores prior to FICO 9 weren’t built or optimized to consider rent.
This includes FICO 8 which, according to FICO, has the most users, and also FICO 2, FICO 4, and FICO 5, which are still the only FICO scores allowed to be used in mortgage lending thanks to the FHFA’s inexplicable delinquency in allowing the mortgage industry to convert to newer scoring models. So, in the normal course of business the answer is “no, rent won’t help your credit reports or scores unless the lender is using FICO 9 or FICO 10.”
There is, however, an exception to that rule. Experian just recently announced a beta that will allow Boost users to add rent to their Experian credit reports via Boost. And, the way Experian is coding rental tradelines added via Boost can and will be seen by FICO 8, which means there’s a possibility that adding rent via Boost can help your FICO 8, 9, and 10 scores.
“As part of this beta release, Experian formalized a new way of reporting consumer-permissioned rent data on Experian credit reports. This new reporting method will result in positive, consumer-permissioned rent payments being considered by FICO® Score 8. To be clear, there have been no changes to the FICO® Score 8 model. Currently, this method of reporting consumer-permissioned rent payments and the inclusion of this information into FICO Score 8 is specific to Experian Boost™.
Boost is an Experian-only service. That means FICO 8 scores generated from Equifax and Trans Union credit reports will not benefit from you adding rental accounts to your Experian credit report.
In sum, rent reporting may or may not help your credit reports and credit scores. I certainly would not advocate someone paying to have their rent added to their credit reports. There are simply too many ways to build credit using traditional means, like secured credit cards and becoming an authorized user on someone else’s credit card account.
Using those methods will result in free credit building where you won’t have to worry about what credit bureau or what generation of FICO score is being used to underwrite your loan applications.