For years, landlords have used consumer credit reports as a way to screen tenants. But, those same tenants havenít benefitted from the timely payment of their rent, at least not where their credit is concerned. On the contrary, an unpaid balance would wind up on your credit report, affecting your ability to rent again or even get approved for new credit cards and loans. For millions of renters, thatís changed.
In 2010, Experian, one of the three major credit bureaus in the U.S., purchased RentBureau a company that had been collecting rental data from landlords for years. Experianís new purchase allowed the company to start that rental history on consumer credit reports. Itís a win for Experian being the first to include this type of information and for some renters who need another positive tradeline on their credit reports.
Not Good News for Everyone
Renters, donít get too excited yet. Your rent payments may not be included on your credit report. RentBureau receives rental data only from a network of property management companies; your apartment complex may not be part of that network, especially if you rent from an individual landlord.
You can check with your property manager to see if they report through RentBureau or even ask that they begin reporting your rental history. Of course, thereís no guarantee that your landlord will signup to start reporting your account information.
For renters whose property managers are reporting their information, Experian says that it will include only positive rental data on Experian credit reports.
Experian says they wonít include negative rent information (for now) since it will be reported through a collection agency. For example, if you move out and donít pay the last month of rent, the landlord will typically refer that balance to a collection agency who will then add it to your credit report. But donít get comfortable making late payments because Experian might start adding them, not to mention youíll have to deal pay late fees and risk eviction.
How Rental Leases Are Reported
The lease would be reported much like an installment loan. The term of the loan is the length of your lease, e.g. 12 months. The original loan amount, which might be reported as a credit limit by some credit reporting services, is sum of your rent for each month in the lease period. Your balance is reported as the balance left on the lease, i.e. your monthly rent multiplied by the number of months left on the lease and goes down each month that you make a rent payment. Only the past 25 months of rental history will be reported, if itís available.
Drawbacks of Rental History Reporting
Many of the drawbacks are the same as with other types of accounts. For example, your timely payments could mistakenly be reported as late. In that case, youíd have to use the credit report dispute process to have that information corrected.
If you share a lease with a roommate, then rent payments will affect both your credit histories. An irresponsible roommate could mean trouble for your credit history. Your credit report will note that there was joint responsibility on the lease, but that wonít necessarily let you off the hook for any problems.
Other Bureaus Left Out
The two other major credit bureaus Ė Equifax and TransUnion Ė donít have access to this rental payment data. So your timely rent payments wonít be included on those credit reports unless your property manager happens to report to those credit bureaus directly. A lender using either of those credit reports wouldnít be able to use your rental history to qualify you for a loan.
Keep in mind that negative rental history, like a default on your lease, could wind up on your Equifax and TransUnion credit reports if that kind of information goes to a collection agency. Negative information remains on your credit report for seven years, even after youíve paid up the outstanding balance.