Traditionally rental payments have not been a part of the major credit reporting agencies. Consumers who paid rent late did not have to worry about a ding added to their credit reports, until now.
In June 2010, Experian, one of the largest consumer credit reporting agencies acquired RentBureau. RentBureau was established in 2005. They developed a National Rental Data Exchange (NRDE) database and system.
The system stores rental payment history, rental collection data and lease applications on approximately 8 million of the nation’s 38 million rental units according to the Los Angeles Times.
Benefits for Building or Rebuilding Credit
Reporting rental payments may have a positive effect on consumers with little to no credit history such as students, recent college graduates and immigrants. Consumers with slight credit files have an opportunity to establish credit history by making consistent on-time rental payments count toward establishing or building your credit history.
If you are rebuilding credit you now have the opportunity to make your rent payments on time and that positive information reported to Experian. This will help improve your ability to qualify for other credit products and services. Your credit score could experience an increase.
One group of consumer most likely to benefit from this new credit reporting will be young people. New legislation has made it more difficult for younger people to obtain credit cards. Young people who rent and make timely payments will find it easier to get credit cards and installment loans.
Drawbacks for consumers who Pay Late
While consumers who pay rent on time may derive some benefit from rent being reported to Experian, there is the huge potential it will hurt consumers who do not pay rent on time. You may even find it harder to rent in the future if negative rental information becomes part of your credit file.
For now, the credit reporting will only affect Experian’s VantageScore credit score. It is likely in the future rental payments will be incorporated more widely into all credit reporting and scoring.
Not all landlords report data
If you are not paying your rent on time you may be okay at this time as Experian may not even have your rent information. According to the National Multi-Housing Council, a trade group for major landlords, the 8 million renters in Experian RentBureau database represent just a slice of the nation’s 96 million renters.
If you rent from an individual landlord or property management company that does not report their data, you may still have the opportunity to have your rental payments reported to Experian. You can request your landlord sign up through a rental payment service working with Experian RentBureau like Clearnow or Williampaid. These services allow for the payment and collection of your rent electronically and offer the ability to opt-in to reporting your rental payment history to Experian.
Renters who have faithfully paid their rent on time will probably benefit the most.
Vice president and managing director of Experian RentBureau, Brannan Johnston said “Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent.”