Did you know that making your rent payments on time can have a major positive impact on your credit score? The three national credit bureaus in the U.S. namely Equifax, Experian, and TransUnion greatly emphasize and encourage the reporting of rent payments. This is because timely payments help establish a good credit record which is imperative for the country’s economy. Besides, it allows you to obtain and make use of valuable services like mortgages and auto loans.
What are Rent Reporting Services?
Rent reporting services can get your rent payments reflected on your credit report. The fee for this service ranges from free to over $100 a year. They promise that if you make your rent payments on time each month, this reporting may improve your credit. You should choose your rent reporting service wisely as you cannot report your rent yourself.
Benefits of Rent Reporting
Helps Credit Score
You cannot build credit by simply paying your rent on time. In order to improve your credit score, you need to be reporting the payments.
According to a 2017 TransUnion study on 12,000 renters, scores increased 16 points on an average within a period of six months after they started rent reporting. The impact enables renters to have access to lower interest rates on auto loans and credit cards. It may even save them money by eliminating or reducing cell phone and utility deposits.
Boosts Timely Rent Payments
A credit report contains both positive as well as negative payment information. If late payers are aware of the consequences, they are likely to pay on time. If you have a good credit record, it will be useful for you, when and if you choose to rent again.
Rent reporting services are of great value to the landlord as well. This is because they provide a complete screening of the tenant’s payment behavior. It is easy to identify if a tenant has been making chronically late payments.
If a property is unoccupied it doesn’t bring income to the landlord. So anything done to keep the tenants in the units will help improve rental revenue. When renters are incentivized with the advantages of rent reporting, they will be happy to renew their lease.
Renewals are also beneficial for the landlord. Apart from minimizing the time the property remains vacant, it saves time screening new tenants and handling the property paperwork.
Reporting rent also reduces turnover by indicating that a landlord cares about building long-term positive relationships. Therefore, the tenants too are happy to continue their contracts with an attentive landlord.
Improves Cash Flow
Besides encouraging timely payments and positive landlord-tenant relationships, reporting rent payments to credit bureaus improves cash flow.
Some rent reporting services automate the reporting of payments to a credit bureau. You have the option whether or not to report delayed payments. On a number of platforms, you can also automate reminders for rent payments, before you actually decide to report a payment as late. This makes the process of rent collection much easier.
Questions You Must Ask a Rent Reporting Service
In order to report your rent through proper channels and processes, you first have to check whether your landlord is already working with a service. If not, you must do research on your part and ask rent-reporting service providers certain questions to choose the most suitable one.
First of all, you need to know which credit bureaus a rent reporting service reports to and what fee they charge for a year of service. This includes setup fee, as well as fee for reporting past rental history.
Secondly, you need to know how your personal data will be protected. So you must be aware as to what measures the service provider will take to ensure and guarantee confidentiality.
You should also know the terms and conditions of cancelling a service. This is important because if you are not satisfied with the service quality, you should not be stuck with having to bear with it for a long period of time.
You must also discuss the possible scenarios in case of a dispute between the tenant and landlord. In some states, if a landlord fails to keep the place repaired, the renters may have a right to withhold payment.
Prominent Rent Reporting Services
Rent Reporters reports to Equifax and TransUnion. It is among the best-priced rent reporting services. Their customers also receive a free credit score. As for the credit score increase using this service, the average rise seen in as less as 15 days is about 35-50 points.
Rental Kharma is also a well-priced rent reporting service, but it only reports to TransUnion. For a two-year verification, the average credit score increase is about 40 points.
Other prominent rent reporting services include Rock the Score, RentTrack, Rent Report Team, and Credit Rent Boost.
As you are working to build your credit and improve your finances, think about how all your financial transactions can help you. Rent payments are a consistent action that you can leverage to improve your credit. You now know more about how rent reporting services can help you get where you want.