Does Paying Rent Build Credit?

If you're like millions of Americans, you probably rent an apartment or home, and so you might be wondering, does paying rent help you build credit? We will provide you with everything you need to know about whether paying your rent help you raise your credit score.

Does Paying Rent Build Credit?

In most cases, paying rent does not build credit because most landlords and property managers do not report rent payments to the credit reporting bureaus. However, if your landlord does report rent payments to the credit bureaus, then paying rent could help you build credit so long as you make your payments on time. If your landlord does report rent and you miss a rent payment, you could cause significant damage to your credit.

If your rent does not appear on your credit report, making your payments on time or failing to make them will have no impact on your credit. However, if your landlord or property manager reports rent payments to the credit reporting bureaus, then making your payments can actually help you build credit.

That said, in most cases, making rent payments does not build credit because landlords and property management companies do not typically report your rent payments to the credit reporting bureaus because it costs them money to do so. It costs them money to invest in hardware, software, and subscription fees to report payments, so most do not report to the credit reporting bureaus.

That said, if your landlord does not report your rent payments to the credit bureaus, you can still cause damage by failing to pay your rent.

Failing to pay your rent could indirectly ruin your credit score. If you don't pay your rent in the event that your landlord or property manager sells the unpaid amount of money to a collection agency. The collection agency will then attempt to collect the past due amount from you.

If you fail to pay the collection agency, they may place a collection account on your credit report. A single collection account can cause your credit score to drop by 100 or more points. The higher your credit score, the bigger the drop will be.

So, to avoid having your account sent to collections and damaging your credit, you should make sure to make all of your rent payments on time.

We know that it may have come as a shock to you that paying your rent does not help your build credit, but don't fret, you're not alone. According to a survey conducted by Transunion, nearly 50% of renters mistakenly thought that paying rent builds credit. The truth is that very few landlords report payments to the credit reporting bureaus.

Why Doesn't Rent Build Credit in Most Circumstances?

Making rent payments doesn't affect your credit score in most circumstances because very few landlords and property managers report your rent payments to the credit reporting bureaus. The credit reporting bureaus do not go out looking at whether you paid your rent or not, it's up to your landlord or property manager to provide that information to the credit bureaus.

Most landlords don't want to pay the cost associated with reporting your information to the credit reporting bureaus, so that info does not appear on your credit report. If the property owner provides that information to the credit reporting bureaus, the three major credit reporting bureaus (Experian, Transunion, and Equifax) will include that information on your credit report. If not, then it will not appear on your credit report.

Can You Use Your Rent Payments To Build Credit

As of the time of writing this post, there is no way for you to self-report your rent payments to build your credit. There are some services out there that promise to report your rent payments to the credit bureaus in exchange for a fee, but be very skeptical of these services as many of them do not have a relationship with the credit reporting bureaus. If you decide to pay for a service that promises to report your rent payments to the credit bureaus, be careful and make sure to make all of your payments on time as missing even a single rent payment can cause significant damage to your credit.

Missing a rent payment after using a reporting service can cause damage to your credit because your payment history accounts for 35% of your credit score. If you make all of your payments on time, you will build excellent credit. However, missing even a single rent payment after beginning to report rent payments to the credit bureaus can cause significant damage to your credit.

That said, here are some of the most popular rent reporting services we could find on the internet.

What Are Some Decent Rent Reporting Services

1. Extra Credit

Extra Credit allows you to report your rent payments, utility payments, and even your phone bill to the credit reporting bureaus, helping you build your credit in just a few months. The service charges $24.99 per month.

2. Credit Rent Boost

Credit rent boost allows you to report your previous, current, and future rent payments to Equifax and Transunion for the low fee of $5.95 per month.

3. Rent Reporters

Rent reporters allow you to report your rent payment to Equifax and Transunion. Rent reporters charge a $94.95 signup fee. After paying the signup fee, it costs $9.95 per month to continue reporting your payments to the top credit bureaus.

4. Rental Kharma

Rental Kharma reports your rent payments to Transunion and Equifax. Their website states that the average credit score increase after reporting rent payments is 40 points within the first 10 days of signing up for their service. Rental Kharma charges a $50 fee to join and a monthly fee of $8.95 per month.

5. Level Credit

Level Credit can help you report your rent to Equifax and Transunion. They do not charge a fee to signup for the service, but they do charge a monthly fee of $6.95. They do provide the option to report your current, future, and 24 months of previous rents payment to the credit reporting bureaus.

What Happens If You Miss a Rent Payment?

If you miss a rent payment, not only can your missed payment result in an eviction, but it could impact your credit if your landlord usually reports your rent payments to the credit reporting bureaus.

If the property owner reports rent to the credit reporting bureaus, a missed payment can result in a significant drop in your credit score.

That said, most landlords do not report rent payments to the credit reporting bureaus because it costs a ton of money to do so.

So, if your landlord is like most, then he does not report rents payments to the credit bureaus. In this case, missing a rent payment will have no impact on your credit.

That said, even if your landlord doesn't report late payments, you should keep in mind that your landlord may sell the outstanding amount that's due to a collection agency.

The collection agency could cause significant damage to your credit if it reports a collection account to the credit bureaus, causing a collection account to appear on your credit report.

A single collection account can knock down an excellent credit score by 100 or more points. So, not only can missing rent payments lead to an eviction, but it could indirectly result in damage to your credit.

The best thing to do is to always make rent payments on time. If you're having difficulty making your payments, please contact your landlord and ask them for a solution or alternatives to avoid eviction and damage to your credit.

Frequently Asked Questions (FAQs)

1. Do rent payments build credit?

In most cases, rent payments will not build credit. If your landlord does not report your rent payments to the credit bureaus, your on-time payments will not build credit. However, if your landlord does report your rent payments to the credit bureaus, then making payments will help you build credit. That said, most landlords do not report rent payments to the credit reporting bureaus.

2. How does paying rent increase your credit score?

Paying rent can only increase your credit score if your landlord reports rent payments to the credit bureaus, and you make all of your rent payments on time.

3. How do I get my rent reported to the credit bureaus?

You can get your rent reported to the credit bureaus if it's not reported by your landlord by paying for a service that reports your rent payments to the credit reporting bureaus. This post provides you with some of the most popular rent reporting services available.

4. Do rent reporting services charge money?

Yes, rent reporting services typically charge you a signup fee and a monthly fee for reporting your rent to the credit reporting bureaus.

5. Do missed rent payment affect your credit score?

Missed rent payments will only affect your credit score if your landlord reports rent payments to the credit bureaus. If your landlord does not report rent payments to the credit reporting bureaus, then missed rent payments will not impact your credit. Most landlords do not report rent payments to the credit reporting bureaus.


How to Do a Background Check On a Tenant?

If you're a landlord and you're worried about renting your apartment or home to an unworthy tenant who may damage your property or stop making rental payments, you should conduct a background check on a tenant before renting him or her your property. So, how do you perform a background check on a potential tenant or renter? We will answer this question in much detail below.

How to Do a Background Check On a Tenant?

You can do a background check on a tenant by using an online tenant background check service to request a copy of your tenant's credit report, as well as an eviction report that shows whether your tenant has been evicted in the past. That said, before you perform a background check on a potential tenant, you must obtain the tenant's permission to check his background. You can find a wide variety of online services that offer you the ability to check your potential tenant's background and eviction history for as little as $25 to $50.

Many services bundle this information, which can be found for prices that range from $25 to $50. For example, Transunion SmartMove offers landlords and property managers a service that screens tenants. Transunion SmartMove screens tenants by providing you with the following three reports: Tenant credit report, tenant criminal report, and tenant eviction report. These three reports are all that you need to conduct a background check on a tenant.

The primary data that you should look for is your potential tenant's past eviction data. Checking a tenant's eviction record is very important because tenants with past evictions are 2.5 times more likely to stop making their rent payments than someone who does not have an eviction. As a landlord, you want to minimize the possibility that you'll have to evict your tenant because evictions are costly and time-consuming.

Once you have a background report on your tenant, you should review the report to determine whether he is employed, has the income necessary to make payments on the apartment or home you're renting him, as well as whether he has an eviction on his record.

Once you've reviewed his background report, you can make a decision as to whether you want to rent to him or continue looking for another tenant.

Conducting a Background Check to Find a Good Tenant

Conducting a background check on your tenant is essential to ensure that you have a good quality tenant who will pay his rent on time and take reasonable care of your property. The primary factor that you should look at when conducting a tenant background check is whether your tenant has a previous eviction.

If your tenant has a previous eviction, there is a good chance that he might stop making his payments to you as well. You should not rely on a tenant's appearance because when tenants show up, they're usually on their best behavior. The best way to assess the quality of your tenant is to conduct a background check.

A background check will usually reveal whether your tenant is employed, his income, his credit history, and his eviction history. This insures that you have a better understanding of the person's you're renting your apartment or home to.

Conducting a Background check on a tenant is extremely important because when you meet the tenant and take them to view the apartment or home you want to rent, they'll be on their best behavior and they'll make you believe that they're the best tenant on earth. However, once they move in, you may see a different side to them.

That's why you should perform a background check to see how they've handled finances in their past, as well as whether they've been evicted in the past. A background check is the most objective way to vet your tenant.

Steps To Do a Background Check On a Tenant

Here are the steps that you should follow to conduct a background check on your potential tenant:

  1. Rental Application - The first thing that you should do is have your potential tenant fill out an application that includes the following: address, date of birth, social security number, employment history, income information, previous landlords' addresses, and references. Also, to conduct a background check, you should make sure that your tenant fills out a form that authorizes you to obtain a copy of his credit report and conduct a background check. You can find a ton of rental application templates online.
  2. Perform a Background Check - Once you've collected your potential tenant's consent, you should perform a background check on your tenant. A thorough background check will reveal your tenant's public record, eviction history, and criminal history. If the background check reveals a history of evictions, you should probably look for another tenant as tenants with evictions are more likely to stop making their rent payments than those who have never been evicted. Also, if your tenant has a criminal history that involves a violent crime, you should consider moving on to the next tenant or ask for an explanation as to the details of the crime that your potential tenant was convicted of.
  3. Perform a Credit Check - You should perform a credit check to check your potential tenant's credit history. You should look for derogatory marks, such as charge-offs, foreclosures, bankruptcies, multiple late payments, and other negative items. If your potential tenants have one or two missed payments, this isn't cause to deny his application. However, if your tenant has a history of making late payments, charge-offs, and other negative marks, you should look for a different tenant because the current tenant has a history of not making payments on other accounts, making him or her more likely to stop making rent payments.
  4. Interview Your Tenant - If your tenant's background check and credit check revealed no red flags, you should move on to interviewing your tenant and asking him questions that are important to you, such as whether your tenant plans on having large gatherings at his home or apartment, whether he or she has pets, are they going to get a roommate, or do they smoke. If everything looks satisfactory, you should move on to finalizing the agreement between you and the tenant.

Why Do You Need to Perform a Background Check On a Tenant?

As previously mentioned, to perform a background check on a tenant, the most important thing that you need is the tenant's consent to perform a background check and credit check. Obtaining a tenant's consent is usually done by obtaining a signed document authorizing you to perform the necessary checks. Also, you will need the tenant's name, address, date of birth, and social security number. If you do not have any one of these things, you will not be able to perform a background check on your potential tenant.

How Long Does it Take to Do a Background Check on a Tenant?

In most cases, running a credit check and background check on a tenants is instant, taking only seconds or minutes to complete. However, in some cases, conducting a tenant background check could take longer. For example, if the tenant has a credit freeze, conducting a background check may take longer to perform.

How Much Does a Background Check on a Tenant Cost?

Conducting a background checks on a tenant cost anywhere from $25 to $75 to perform. For example, Transunion SmartMove costs $35 per tenant. Another tenant screening service E-renter provides landlords and property managers the ability to conduct a background check on a potential tenant for $34.95. So, plan to spend approximately $35 to conduct a background and credit check on your tenant.

Self Management vs Property Management

If you want to rent out a property that you have, you have two options: you have the option to management the property yourself, including vetting your tenants, or you can hire a professional property management service to manage the day-to-day operations of your property, including finding tenants for a fee.

If you hire a property management service, they will advertise your property for you, screen potential tenants, collect rent from tenants, and evict a tenant if they stop making their rent payments.

If you do not want to hire a property management services to conduct background checks on prospective tenants, you can do so yourself by using a service, such as Transunion's Smart Move, which offers you the ability to screen tenants by providing you with a criminal report, credit report, and eviction report on your prospective tenants.

That said, we understand that not every landlord wants to spend money on a professional property manager to manage his property and prefers to do the leg work him or herself. That's totally fine. We have provided a detailed steps on how to perform a background check on a tenant.

Can You Deny A Tenant's Rental Application For Any Reason?

In most states, a landlord does not have to have a reason to deny a tenant's rental application. However, it is unlawful in every state for a landlord or property manager to deny a tenant's rental application based on his or her race, color, religion, or national origin. So, although you do not need a reason to deny a tenant's rental application, you should avoid do so based on race, color, or religion.

Credit Score Planet Frequently Asked Questions

1. Is it legal for a landlord to do a background check?

It is legal for a landlord to conduct a background check and credit check only if the landlord first obtained the tenant's permission to do so. For a landlord to conduct a background check, he will need the potential tenant's name, dob, address, and social security number.

2. What do landlords look for on a background check?

The primary thing that landlords look for on a background check is whether you've been evicted in the past or whether you have derogatory information on your credit report. Also, landlords may conduct a background check to see if you've been convicted of violent crimes in the past.

3. How long does it take to do a rental background check?

It takes a few minutes to do a rental background check in most cases. Sometimes, more time is required.

4. Can I run a tenant background check on myself?

Yes, there are plenty of services online that will allow you to run a background check on yourself.

5. Do landlords actually call your employer when performing a background check?

Some landlords will call your employer to verify that you're actually employed or to verify your income. That said, many landlords do not dive that deep when conducting a background check on a tenant.