Why Don't Rent Payments Show Up on Your Credit Report?

Rent payments don't usually show up on credit reports.

When it comes to credit reporting, renters get the short end of the stick. This is very ironic when you consider that, if you buy a home, your mortgage becomes of the most important tradelines on your credit report. Your ability to consistently pay your housing debt on time shows lenders that you are financially responsible and a good lending risk. Unfortunately, you can be the most reliable renter on Earth and your credit will remain unaffected because, with few exceptions, rent payments just don't show up on your credit report. 

Why Don't Landlords Report Rent Payments to the Credit Bureaus?

In order for a creditor to report debt on your credit report, it must have a credit reporting contract with the credit bureau. Unless you've been a victim of identity theft, the credit bureaus won't share your information amongst themselves. This means that if a landlord wants your rent payments to appear on all three of your credit reports, the rental company must report the debt to each credit bureau individually. 

The problem that arises here is that, in order to make these reports, the landlord must apply for and be accepted into each credit bureau's reporting program. This isn't as simple as merely paying a fee and installing credit reporting software. Each credit bureau requires an on-site inspection (to ensure that your business actually exists), a monthly membership fee (not cheap, not cheap at all..) and special credit reporting software (also not cheap). 

The up-front costs and regular fees associated with credit reporting are pricey and, when multiplied by three (each credit bureau has its own fees and requirements), can prove too expensive for your average landlord to handle. Unlike banks and credit card companies, apartment complexes and rental companies generally aren't big conglomerates and the high cost of a credit bureau memberships cuts too deeply into their profit margins to be worthwhile. 

Can I Ask My Landlord to Report My Rent Payments to My Credit Report If I Pay the Fee?

I hear this question a lot. You can ask your landlord to report your rent payments to the credit bureaus, sure, but don't expect it to actually happen. A company isn't free to report singular accounts to the credit bureaus for a fee. It's all or nothing. Either your landlord jumps through the hoops of fire that are required to become a full-fledged information provider or not. Without a reporting contract, the landlord can't insert any information on your credit report. 

Note: Experian's RentBureau program is an exception to the rule above. If your landlord participates in the program, he/she can submit the payments you make to RentBureau. A Rentbureau membership is much cheaper than a standard credit bureau reporting membership--making it more accessible for landlords. The best part? Payments submitted to RentBureau appear on your Experian credit report and influence your credit scores. 

Rent Payments Don't Help Build Your Credit Scores, But They Can Destroy Them

As if shelling out a big chunk of your income and not getting credit for it (bad pun, I know) isn't bad enough, if you miss enough rent payments or move out without paying any remaining rent or fees, your landlord can sell the debt to a collection agency or sue you. Most consumers know how damaging a collection account is to their credit rating, and fear is a powerful motivator. Collection agencies have a strong incentive to maintain credit reporting contracts, so if your landlord sends your unpaid rent to collections, your credit scores will take a hit as soon as the debt collector reports your account to the credit bureaus. 

You'll also end up with damaged credit if your landlord decides to file a lawsuit against you to collect unpaid rent and/or fees. Winning the lawsuit nets your landlord a civil judgment which it can then use

You can be sued over unpaid rent.

to garnish your wages and bank accounts, among other things.

Having your wages docked and your bank accounts levied is extremely frustrating, but the longest lasting consequence of the judgment comes in the form of credit damage. Civil judgments appear on your credit report and are just as damaging as a collection--sometimes even more so.

Rent Payments May Appear on Alternative Credit Reports

Your credit files from Experian, Equifax and TransUnion aren't the only credit reports out there. For young people just starting out or those with limited credit histories, alternative credit reports provide lenders with a way of assessing a person's risk when that person lacks a traditional credit report and scores. Examples of items that help establish an alternate credit file include: 

• Rent payments
• Insurance payments
• Utility payments
• Cell phone payments 
• Child support payments

In the wake of the recession, many debtors have been left with few options for salvaging their devastated credit scores. If their rent showed up on their credit reports, it could do just that. Rent is just as reliable an indicator of an individual's responsibility level as a mortgage. In recent years, demand has risen significantly for the credit bureaus to include rent payments in credit score calculations. Although your rent payments don't show up on your credit reports right now, the credit bureaus are working to establish programs, such as Experian's "RentBureau", that will take your rent payments into consideration when determining your credit scores.

Related Posts:

How Landlords Pull Your Credit Reports and Scores

Do Apartment Credit Checks Hurt Your Credit Scores?

How to Build Your Teen's Credit

Help your teen build credit

One of the smartest financial moves you can make is to help build your teen's credit. You're not only teaching your children good old fashioned responsibility, you're giving them a foundation they're going to need. Too many parents see no point in building credit for their children, but one day soon those kids are going to turn 18 and strike out on their own. Regardless of whether your teen heads to college or into the workforce, having a developed credit history gives him a significant advantage over other kids his age.

Why You Should Build Credit For Your Teens

Before I tell you how to build credit for your teen, I have to tell you why you should. You know, really sell you on the idea. If you're already in my camp and don't need to be preached at, feel free to skip to the next section.

Guess what happens when a child leaves home and finds himself out in the great big real world? He needs things. Sure, he may have a job, but his part-time college job or starting position in the company he hopes for a career in isn't going to pay him enough to get the things he needs. Take a car, for example. Let's say your child wants to buy a car. He needs to finance it and make payments. Without an established credit history guess who he's going to turn to to co-sign that loan? You. You love your child, you want to help but co-signing anything is accepting a risk that carries no rewards, you get me?

If you build your kid's credit ahead of time, he won't need to lean on you quite so much when he's finally out of his own. This doesn't just spare you the headache of having to worry that your much-loved offspring's inexperience will leave a few black marks on your credit before he finds his feet financially. It also gives him a sense of maturity and responsibility. He'll be proud of the fact that he can stand on his own--and you will too.

How to Build Your Teen's Credit Score

When you're building up bad credit, you have a variety of options. When you're building your teen's credit, you really have only one: a credit card. Wait. Stop. I can hear you saying to yourself, "But Lee, no credit card company is going to give a minor with no credit history a credit card." And you'd be right. But a credit card company isn't going to give your teenager his first credit-building card: you are.

Most credit card companies allow cardholders to add their children to their accounts as "authorized users."

Build your teen's credit with an authorized user card.

An authorized user isn't a full cardholder and can't make changes to the account like a joint cardholder can, but they do receive a card of their own connected to the primary cardholder's account. Most credit card companies also report the primary cardholder's account tradeline on the authorized user's credit report (Most, but not all--make sure your credit card company reports authorized users. If they don't, adding your child to your account is pointless).

This provides you with a golden opportunity to help your teen build credit. Provided your account is in good standing, your child will have a positive credit report as soon as the credit card company reports the new authorized user account to the credit bureaus.

Warning: Don't Accidentally Destroy Your Teen's Credit Scores

No one is perfect and circumstances can change. If you suddenly find yourself unable to make the payments on your credit card, you've got to contact the credit card company and remove your teen as an authorized user before you default. Missing a payment by a few days will leave you with a fee but no credit damage. Being 30, 60 or 90 days' late on your credit card payment is devastating for your credit scores. If your teen remains an authorized user on your credit card account when that occurs, his credit will suffer as a result of your financial mistakes.

If you decide to strategically default--that is, you make a conscious decision to stop paying your credit card debt rather than merely forgetting--you can and should remove your child as an authorized user first. The tradeline will still remain on your teen's credit report, but the credit card company will no longer update it. This protects your child from the negative consequences of your default while also allowing him to keep some credit history he can build on in the future.

One Tradeline and Your Teen Can Build His Own Credit From There

All you need to do to build your teen's credit is to give him one tradeline. A single authorized user account is enough to create a credit report and score for your child. The longer the account remains open and reporting, the more weight it carries (the age of an account factors into your credit score). Once your child turns 18 he can take the reins and the foundation you've given him and use it to build his credit score up even further. Here are just a few basic credit-building methods a person with limited credit can use to increase his tradelines and, ultimately, his credit scores.

• Student credit cards---These often have lower requirements than standard credit cards and can help your teen build more credit once he starts college. 
• Secured credit cards---Allows your teen to pay a deposit he can then borrow against to build credit. Make sure the credit card company reports accounts to the credit bureaus. Not all secured cards do. 
• Borrowing against his own money--If your teen has a savings account, his bank may agree to give him a small personal loan in the amount he already has in his account (or slightly less if you factor in interest). He can use his savings to repay the loan and build credit. 
• Finance a car--Just about anyone can get an auto loan these days, bad economy or not. Auto loans almost always appear on your credit report. Just make sure to shop around for a decent interest rate. 
• Store cards--Store cards often have less-stringent approval standards than regular unsecured credit cards yet still report payments to the credit bureaus.
• Get a job--Getting a job doesn't directly affect your teen's credit, but lenders are a lot less likely to work with individuals that don't have a steady income. A steady job, even a part-time job, makes your child a better candidate for credit cards and loans and, in turn, helps him build his credit. 

The right age to start building your kid's credit is up to you. Obviously a ten-year old doesn't need a credit report. And its up to you whether or not to actually give your child the authorized user card and let him use it. Although having his own card helps your child learn more about managing money, don't put yourself in a sticky financial situation in the hopes of teaching your children more about money and credit.. Whatever route you choose, give some serious thought to helping build your teen's credit--it could make a world of difference for him as an adult.

Related Posts:

Improving Credit Scores After Collections

Credit Card Authorized Users Hounded By Debt Collectors  

Can a Collection Agency Come After a Minor?