Building a credit history is crucial in today’s economy. It allows you to access diverse financing, obtain lower interest rates and qualify for future mortgages. Unfortunately, rent payments are not automatically factored into your credit score. That means, for many people, their largest monthly expense doesn’t help build credit.
You can make sure your on-time rent payments are being reported to credit bureaus through rent reporting services. There are two ways that your rent can be reported through a rent reporting service: your property manager can report payments or you can report payments yourself.
Your Property Manager Reports Rent Payments
Your landlord may already be automatically reporting your rental payments to credit bureaus, but not all landlords do. Contact your property management office to determine if your property is participating in a rent reporting service, such as Freddie Mac’s new initiative with Esusu Financial, Inc. to help renters build credit. Some of these programs, like Freddie Mac’s new initiative, are paid for by the landlord and do not charge tenants a fee to report on-time rent payments.
You Report Rent Payments
If your property doesn’t participate in a rent reporting service, you can sign up for one on your own.
Regardless of the approach you take, there are many rent reporting services to choose from, and it’s important to ask the right questions before signing up.
- Does your property already work with a rent reporting service? Check whether your property manager recommends a service they already work with. This may be the easiest route to have your on-time payments reported.
- How much does it cost? Determine how much rent reporting costs. For properties participating in Freddie Mac’s rent reporting initiative, the reporting service is free to tenants, but most providers charge fees, including monthly fees and setup fees. Make sure to read the terms of service closely.
- Does the service report to all three credit bureaus? Make sure your data goes to all three main credit bureaus in the United States, which each generate its own credit score.
- How are late or missed rent payments handled? Understand how late or missed payments are treated. Anyone can fall on hard times, but not every rent reporting service treats this the same way. You’ll want to understand if late or missed payments count against you.
- Is my data secure? Make sure to research the reputability and data practices of any rent reporting service you choose to work with.
- What’s the cancelation policy? Some providers allow you to cancel at any time, but others aren’t as flexible. Make sure you know before signing up.
To learn more about building credit, use our suite of financial capability and homeownership education resources, CreditSmart®.