How can rent help build credit?

If you are looking to build your credit before buying a home, renting might help you do that. If you are able to pay your full rent on time every month, working with a rent reporting service could boost your score. 

Rent reporting services collect a report based on your payment history: on-time vs. late and full or partial payments. The service takes your rent payment report and turns it over to credit bureaus like Experian, Equifax and TransUnion. 

Some reporting services only report on a positive payment history and can look back on the previous two years as well. A positive rent payment history can help boost your credit score, which may get you more favorable terms when looking for a home loan. 

Start your home loan application and see how a boost in your credit score could help. 

No, your rent is not necessarily reported to credit bureaus by default. Some landlords are enrolled in rent reporting services. If your landlord is not enrolled and you are looking to do it yourself, know that these services could cost you. So, checking with your landlord first could save you some money. 

When looking for a rent reporting service, you will want to research and find the best one for your needs. Each service comes with requirements you will want to consider. 

Most rent reporting services you look at will come with a cost. This is why it is smart to check with your landlord to see if they are enrolled in any of these services. The cost between each service may vary, as some offer monthly billing while others may ask for annual payments. Make sure you factor in any costs to your monthly bills and aren’t spreading yourself too thinly financially. 

Depending on which service you choose, it might report to just one or to all three credit major bureaus. Some of them will also only report positive rent payments. The service you choose might need to get verification from your landlord before starting. 

It typically takes about a week after you make rent payments for credit bureaus to be notified. In some cases, it could take around 30 days from your first reported rent to see a change in your credit score. Your rent reporting service might look at the past two years of rent payment when making its report.  

The credit score you need to get a mortgage will depend on your lender and the mortgage type you apply for. 

Each lender could have slightly different credit score requirements for the mortgage you consider. If you are looking for a mortgage that accepts lower average credit scores, you might want to consider a government-backed home loan, such as a VA or FHA loan. 

Before deciding on a mortgage, be sure you meet the loan qualifications and your lender’s requirements. 

Rent reporting services is one way you can slowly build up your credit. But if you are looking for other ways to boost your credit score quicker, you may need to do a little more work. 

Paying back any debts in a timely manner and avoiding future late payments is the best way to build up your credit score. Opening a new bank account could benefit you by helping establish a credit history. Avoiding multiple applications for credit accounts can help prevent any negative impacts on your score.  

Starting your mortgage process is as easy as researching the loan best suited for you, connecting with a lender and starting your application. 

After you have seen a boost in your credit score through a rent reporting service or other method, you may be looking to begin your home loan application. Before you start your application, make sure you have looked into the different kinds of mortgages offered and know which option is best for your situation. When your credit score is where you want it to be and after you have researched the kinds of mortgage for your needs, you’ll be ready to start your mortgage application. 

If you are ready, start your mortgage application with a trusted lender today! 

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