It’s the great credit divide in American housing: If you buy a home and pay your mortgage on time regularly, your credit score typically benefits. If you rent an apartment and pay the landlord on time every month, you get no boost to your score — zip. Since most landlords aren’t set up or approved to report rent payments to the national credit bureaus, their tenants’ credit scores often suffer as a direct result.
All this has huge implications for renters who hope one day to buy a house. To qualify for a mortgage, they’ll need good credit scores. Young, first-time buyers are especially vulnerable — they often have “thin” credit files with few accounts and would greatly benefit by having their rent histories included in credit reports and factored into their scores. Without a major positive such as rent payments in their files, a missed payment on a credit card or auto loan could have significant negative effects on their credit scores.
You probably know folks like these — sons, daughters, neighbors, friends. Or you may be one of the casualties of the system yourself, a renter with a perfect payment history that creditors will never see when they pull your credit. Think of it this way and the great divide gets intensely personal.
But here’s some good news: Growing numbers of landlords are now reporting rent payments to the bureaus with the help of high-tech intermediaries who set up electronic rent-collection systems for tenants. One of these, RentTrack, says it already has coverage in thousands of rental buildings nationwide, with a total of 100,000-plus apartment units, and expects to be reporting rent payments for more than 1 million tenants within the year. Two others, ClearNow Inc. and PayYourRent, also report to one of the national bureaus, Experian, which includes the data in consumer credit files. RentTrack reports to both Experian and TransUnion.