Housing is often a renter’s largest monthly expense. But while mortgage payments can help homeowners build positive credit histories, rent payments typically have not done the same for renters — until now.
Rent reporting services allow renters to ensure their rent payments are reflected on their credit reports. While the potential impact depends on each person’s financial situation, it can help renters build credit history, especially if they’re new to credit. There are also perks for property owners: Rent reporting might incentivize on-time rent payments and make properties stand out from the competition.
Considering offering rent reporting at your properties, or have a renter who wants to report their payments? Eligible Story users can report payments for 12 months for free through financial technology company Self. After 12 months, users can continue Self Rent and Bills reporting by signing up for a paid subscription.
Stronger credit can help renters improve their financial security, and that’s good news for property owners counting on their rent payments.
On-time rent payments: Knowing rent payments contribute to credit scores could give residents an additional incentive to make timely payments. In fact, about 73% of renters said they would be more likely to pay rent on time if those payments were reported to credit bureaus, according to a 2019 TransUnion survey.
Beat competing properties: Offering to report rent payments might also help property owners stand out from the competition. Given a choice between two otherwise identical units, 67% of renters told TransUnion in a 2019 survey they’d choose the apartment that offers rent reporting.
Government assistance and incentives: There’s a growing movement behind rent reporting solutions and giving renters the option could help property owners meet regulatory requirements or qualify for incentives. Freddie Mac is expanding a pilot program offering investors seeking multifamily loans closing cost credits when they report rent payments. And in California, owners of housing developments with at least 15 units that receive government assistance must offer rents the option of having their rent payments reported, under a 2020 law.
Research supports the idea that reporting rent payments can improve access to credit for some people, particularly those who don’t have the credit history needed to get a score under common credit scoring models, according to a report from nonprofit organizations the Urban Institute and FinRegLab. In studies by the U.S. Department of Housing and Urban Development, Credit Builders Alliance and Office of the New York City Comptroller, people who could receive a credit score when rent payments were included in their credit history often had prime or near-prime credit scores.
It's important to note that not all credit scoring models will factor rent payments into a credit score, even if they’re reported to credit bureaus. Newer models, like FICO 9 and 10 and VantageScore, will reflect rent payments, but older models won’t.
However, even if a scoring model doesn’t include rent payments in the credit score, the credit report will still show rent payments reported to credit bureaus, says Reeve, which could help the renter prove their ability to consistently make payments.
Working with a company that handles reporting rent payments is a lower lift. Factors to consider when choosing a rent reporting solution include:
Renters who use Story by J.P. Morgan can find out more about reporting rent payments with Self by signing into their account and selecting the “Rent reporting by Self” link on the left-hand navigation bar.