For the sake of this writing, I will assume you are just at the beginning of your credit journey. You should be forewarned that building your credit to an adequate score can be quite intimidating and challenging. Although, the first thing most people do is to acquire a credit card, when you do that there is a higher degree of debt associated with such action, particularly if you are not able to pay the debt you’ve made monthly. Hence, in this writing I concentrate on one method of building and raising your credit score – renting.
While this method of improving one’s credit score is rather new, it can be quite advantageous and effective when you are aware of the game and play it well.
1. Rent Reporting Services
Most people aren’t aware of the excellent services provided by Rent Reporting companies. Once you’ve signed up and become a paid subscribed member too one of these service providers they will gather and collect pertinent information with respect to your payment history with your rental management or landlord. Once collected, they then report this information to the three major credit bureaus on your behalf, including Experian, TransUnion and Equifax. Some of these Rent Reporting companies only have a relationship with one credit bureau and thus they are only able to report to it. But there are others who have a relationship with all three bureaus. Here are a couple of suggestions for Rent Reporting companies to be on the look out for:
RentalKharma – this service provider reports only to TransUnion. They allow for 24 months of your payment history to be reported which would be included into your credit report for all inquiring creditors seeking to understand your credit reputation. This is can be a serious advantage for those who have paid the rental payments timely over the 24-month period. However, if you have not been paying timely then it is less an advantage. RentTrack – this service provider offers a back office to their paying members which allows the consumer to monitor their credit and spending habits at the same time as getting the advantage of having their rental payments reported to the bureaus.
2. Verification of Rental Status
After you’ve selected your rental reporting company they will then require verification of your rental status, which means they will have to connect with your landlord or rental management to verify all information you’ve provided on the initial application is true. RentalKharma charges a nominal verification fee of $40 while RentTrackers has none.
With respect to other fees charged by these service providers, RentalKharma and RentalTrackers both charge $9.95 monthly in order to report the payments of the consumer to the credit bureau(s). There may also be other fees associated with reporting historical data onto your credit report.
3. Make your rent payments on time
Need I remind you of the obvious? Well just in case there are some who forgot… You’ve got to keep paying your rent timely! Paying your rent late can have the opposite effect on your credit that you are desiring therefore keep paying your rent in a timely fashion. By not doing so you nullify the effectiveness of this credit boosting method. There are plenty of apps available for download to your smart phone that can act as a reminder and alert you with a notification when your payment is due – use it.
4. Monitor Your Credit
Once you are a member of one of the rental reporting services, you need to monitor your credit on a regular basis to be certain that you payments are in fact being reported. This can best be done by becoming a member of a credit monitoring service such as CreditCheckTotal. There are free credit mornitoring services as well such as CreditKarma, however most of the free credit monitoring services will have a limited view. For example, at this time, CreditKarm does not have a relationship with Experian. Therefore once you’ve become a member of their site you are only able to view payments being reported on Equifax and TransUnion. If you’re interested in monitoring your credit score solely then Discover Card offers a free FICO score to everyone, regardless if you have their credit card or not.
Last Word of Caution…
Unfortunately, there’s one downside to this method. Rent reporting is not widely accepted as a standard criteria used in all scoring algorithms. For instance, FICO has many types of scores such as FICO 8, FICO 9, FICO XD, etc etc. However, presently the FICO scoring models that use rental reporting data are only FICO 9 and FICO XD, which are relatively new models that are designed for those consumers who are “unscorable” as expressed in the Wall Street Journal. But the unfortunate part is that FICO 8, which is the most widely used by creditors in commerce, does not use or consider rental payment history as a necessary element when calculating its score.