How to Build Credit While Reporting Rent Payments

Building Credit at a Young Age

It's important to build your credit at a young age simply because it can take quite a while for your credit to become established. As a young adult, you want the transition from having "no credit" to "established credit" to be as smooth and as quick as possible. Moreover, the things you can do to establish credit at a young age, should be viewed as relatively "low-hanging fruit" and quite easy to execute.

Reporting Your Rent Payments

Reporting on-time rent payments demonstrates that you are financially responsible and are "credit worthy". The process is nearly the same as any credit reporting indicators that naturally appears on your report (i.e. mortgages, auto loans, credit cards, etc.), the only difference is that your "payment history" is self-reported, so it can be less impactful. So, reporting on time rent payments is a great way to help you catch up in regards to credit worthiness. This is ideal for consumers who might not have a "mortgage" and "many available lines of credit". The process isn't overly complicated but there is a lag in self-reporting. This information can take some time to get to the credit bureaus and it's usually not included until the end of this current cycle (very unlikely that these are reported off-cycle). So, the lag for it to appear on your credit report could be 30-60 days in some cases.

Reporting to Three Bureaus

It’s important to note that you can directly report all of your rent payments to all three credit bureaus (Experian. Equifax and TransUnion). These services are free, but you do need to put in the work of self-reporting the information to the bureaus on your own. Experian even has a pretty seamless process where you can even report your Netflix subscriptions, utility bills and other small monthly subscription payments.

Paid Reporting Services

There are also paid services that will do the heavy lifting for you. The services which are performed directly via credit bureaus are typically free. However, you will need to self-report with each individual bureau, so this is more of a tedious and costly process. Fees and services vary with each service provider. Most charge around $5-$9 with some charging an initial setup fee of $50 or even a one-time fee of $90 for all future reporting.

Which Route Should Consumers Go?

Consumers should always go the route that has a higher success rate! If you are a DIY type of person, you should definitely consider self-reporting all rent payments to all three bureaus, it's free but you just need to do a little leg work. If you are the type of person who might not follow through, it might be better to consider a paid reporting service! This way you won't forget to self-report and have peace of mind, knowing that there is one less thing on your plate each month.

Pros of Paid Services:

The process is thoughtless and the legwork isn't on you; it's an automated process.

Cons of Paid Services:

These services cost money and might not significantly improve the credit of individuals with "good credit".

Who Are the Best Candidates for Rent-Reporting Services?

The best candidates for rent-reporting services are consumers who would most positively be impacted by the reporting of on-time rent payments, in terms of credit! So, this typically means individuals with "no credit" or "bad credit" are the ones to benefit the most. These individuals will see the most impact, since it will likely lead to an improvement of their credit worthiness. If you already have good credit, reporting your rent payments might not necessarily be worth your time or money.

Alternatives

Other alternatives include services that your landlord already provides. If your landlord already has a service agreement with one of these companies, the reporting will be both "automated" and "free" for you.

Keep Expectations Low

I would honestly try to keep expectations low! These are all self-reported so the impact to your credit will not be as significant as having timely payments to a credit card for example. Moreover, if you already have established credit, the impact is a lot less likely to be significant. However, it will not hurt and it will positively impact your score every given month. This isn’t an overnight process; these things take time!

Don't bank on rent-reporting services completely changing your credit score/report! However, the process should definitely be considered "low-hanging fruit" in helping boost your credit score. Otherwise, it’s always recommend that consumers apply for a "secured credit card" or even a "credit builder loan" if they are looking to improve their credit worthiness.