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Rent data added to credit reports

By Leslie McFadden · Bankrate.com
Monday, January 31, 2011
Posted: 2 pm ET

Until very recently, paying your rent on time didn't help you build or establish credit. The reason: positive rental payment data didn't show up on your credit reports. This month, however, Experian, one of the three major credit-reporting agencies, announced that it is has begun incorporating positive rental payment history into its consumer credit files. Experian gained this residential rental data through its acquisition of RentBureau, a specialty credit bureau which currently has rental payment histories for more than 8 million residents in its database.

"Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent," said Brannan Johnston, vice president and managing director of Experian RentBureau, in a news release.

Previously, the only way rental payment data would appear on your credit report was if your account was in collections. "Positive rental payments were what was really missing," Johnston said in an interview.

The news is good for those trying to establish or thicken a "thin" credit file -- one with limited data. Rental payments, if reported to RentBureau, would appear as a rental trade, a type of installment account.

Will rent payments affect your credit score?
For now, the data will only appear on Experian credit reports -- if it's being reported in the first place -- and only a few credit scoring models are currently designed to use the data. VantageScore, the credit scoring model that was jointly developed by the three major credit reporting agencies, is one of them.

Affected consumers could see a boost to their VantageScore credit score. "Our research shows that over one in three consumers in the highest risk VantageScore band will improve to at least the next score band with the addition of positive rental data from RentBureau," said Johnston in the news release.

"It had the biggest impact on people who previously had very little data," he said in an interview.

Currently, only positive rental history is being reported. According to Johnston, the company could start adding negative rent data, such as late payments, to credit files sometime in 2012.

The dominant credit score in the industry, the FICO score, doesn't currently consider positive rental payment data in scoring. "We would need to look at the data to see how it affects the FICO score," says Careen Foster, director of scores product management at FICO.

She said the company is waiting on a data sample and would have to evaluate the predictive value of the data before making changes. FICO scores measure the risk of someone becoming seriously delinquent in the next 24 months.

Still, the inclusion of positive rental payment data is a win for millions of consumers -- especially those with a limited credit history. The lucky renters will finally "get credit" for paying their rent on time each month.

Your reaction: Do you think rental payment records belong in credit reports?

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6 Comments
Erin
March 14, 2011 at 12:49 pm

I'm so in favor of this I cannot stress it strongly enough! My company sells homes on "rent to own" programs. Usually, our biggest customers are people who need to clean up their credit in order to go out and get a bank loan. Being able to show thru a FICO score that they've made timely payments on their rent would be a real boon for these people, and a big plus for my business - it would mean more folks being able to close sooner and take advantage of home ownership!

Erica R.
February 07, 2011 at 12:18 pm

I think the positive and the negative renting history should reflect. I always pay my rent on time, and have never been late or had a check bounce. I know other people in the complex that drop off their rent checks a week late regularly. I feel that I am far more likely to make regular and timely payments on other bills than someone who is willing to pay something as important as the place they live late, and it would give us an opportinity to build up credit that we don't have otherwise. My husband and I don't want credit cards right now, but paying on time for our cell phones, internet, and rent isn't helping us - we're both essentially off the grid. To us, it seems to be punishment for living within our means, as opposed to on credit.

Renter
February 01, 2011 at 5:08 pm

Paying rent should NOT be taken into account for credit history

eileen
February 01, 2011 at 1:46 pm

Yes! It definitely should be part of the credit reports, especially given that foreclosures crisis. I have a foreclsoure on my record due to my husband losing his job. We were unable to afford the house anymore due to that and lost it to foreclosure. Other than the foreclosure, our credit reports are pristine. If rental payments are included, it shows that we are still responsible people and future creditors will have more ability to see that we are victims of circumstance versus truly irresponsible people who do not take credit seriously.