Can You Build Credit By Paying Rent?

The following is presented for informational purposes only and is not intended as credit repair.

Your credit score is a crucial part of your overall financial health. A strong score makes it easier to access loans and additional credit at desirable terms.

But to build strong credit you also need to use credit…and that can be tricky, especially when you’re first starting out. It can be difficult to show that you’re creditworthy when you have no credit history, which can put otherwise responsible borrowers at a disadvantage.

One solution that’s started to gain popularity recently is rent reporting, which adds your monthly rent payment history to your credit report and becomes a factor in your credit score. For someone who hasn’t used much credit, but has successfully paid their rent on time each month, this could be a great way to boost your score. But is it right for you? Here’s what you need to know.

What is rent reporting?

All credit reporting is voluntary. Creditors report on the activity of their customers because it's in their own best interests: knowing whether or not someone has made timely payments in the past is a major factor in whether or not to extend them new credit.

Landlords have historically lacked the tools and incentive to report their tenants' payment history. That's changed in recent years with the launch of multiple platforms to make rent reporting easy and accessible for both landlords and tenants alike. Now, if your rent isn't being reported, but you'd like it to be, you have options.

How do you add rent reporting?

It’s possible your landlord already makes reports to the credit bureaus. As the concept gains popularity as a selling point in a competitive housing market, you may see more landlords offering rent reporting as an incentive to prospective residents.

In the meanwhile, if you want rent reporting and your landlord doesn’t offer it, you’ll have to pay for it yourself. The size of the fee and how often you need to pay it will vary depending on which service you use.

And there are a lot of options.

• Rental Kharma charges $75 to add all of your past rental history for your current address to your credit report, plus $8.95 a month to add your ongoing payments.  
• Rock the Score costs $48 to enroll, plus $6.95 a month to begin reporting your current rent payments. Optionally, you can pay $65 to add the past two years of rental history to your credit report.
• Rent Reporters charges a $94.95 set-up fee (which can be spread over three months) plus a $9.95 monthly fee ($7.95 if you pay for the entire year in advance). They claim to be able to report up to four years of past rent payments.
• Piñata is $5 a month, although they charge a yearly rate so you'll be paying $60 once per year. That price includes 24 months of back reporting on rent payments.
• Self is the rare rent reporting option that has a free tier. It costs nothing to connect Self to the bank account you use for rent payments and have Self report those successful monthly payments to all three major credit bureaus. It costs $49.95 to add the past 24 months of rent payments to your reports.
• Boom is $3 a month (though, like Piñata, they charge a full year upfront, which is $36) which gets you ongoing rent reporting from the time you sign up. 24 months' worth of back reporting is also available for an optional one-time $25 fee.

And that list is by no means exhaustive. Your best bet is to talk to your landlord first to see if they use (or are planning to use) a rent reporting service. After that you’ll want to research your options and pick the service that best suits your needs. 

How much would rent reporting change my credit score?

It’s hard to say exactly how much you might benefit from including your rental payment history in your credit report. In 2019, Goldman Sachs completed a pilot program that focused on residents in an affordable housing program. Participants in the pilot saw their scores increase by an average of 42 points, which is a significant gain, though the sample size of the program was small, with 32 residents participating.

Piñata claims that users can improve their credit score by as much as 150 points, but you should probably expect something a little less drastic.

That said, assuming you've been paying your rent consistently, adding your rental history to your credit report will almost certainly be a positive for your credit – especially if the rest of your credit history is fairly vacant.

Is rent reporting worth paying for?

Ultimately, the choice to use a rent reporting service comes down to cost versus benefit. If you need to build strong credit quickly (perhaps because you want to stop renting and buy a home soon), then the cost of rent reporting may be outweighed by the long-term savings you’ll get by having strong credit when you start looking for a home.

On the other hand, if you don’t have any major purchases on the horizon, you may be just fine building credit slowly through credit cards and other, more traditional means.

Is bad credit limiting your options? MMI offers free financial counseling 24/7, online and over the phone. Let our experts take a look at your situation and provide tailored advice for improving your credit, repaying debt, and balancing your budget.