Credit Boosting 101: How Paying Rent Can Build Your Credit

In today's competitive rental landscape, where securing the perfect apartment requires more than just a good application, understanding credit scores has become paramount. A solid credit score not only increases the likelihood of securing your desired apartment but can also impact rental terms and security deposits. This blog post will explore how boosting your rent payments may positively influence your credit score and provide actionable insights to potentially improve your financial standing.

Understanding Credit Scores:

What is a Credit Score?

A credit score is a numerical representation of your creditworthiness. Essentially, it predicts how likely you are to pay back a loan on time. Companies use a mathematical formula—commonly known as a scoring model—to create your credit score from the information in your credit report. It's important to understand that you do not have just one credit score; there may be various credit scores available, as a result of differences in each credit reporting agency’s distinct scoring model, both to you and to lenders. For renters, a good credit score can be crucial. Landlords and property managers often check credit scores to assess whether prospective renters are likely to pay rent on time. Most apartments in 2024 require a credit score of 670, according to Business Insider, though this threshold can vary by landlord. A higher credit score can make you a more attractive candidate, potentially giving you access to better rental terms and choices. Conversely, if you're "credit invisible"—meaning you lack a credit history with the major credit bureaus—or "unscorable" due to insufficient or outdated credit information, you may encounter significant challenges in securing a lease for an apartment.

Different Types of Credit Score

There are three major agencies that collect credit data -- Experian, Equifax, and TransUnion. Because the credit reporting data at each agency can be different, your credit scores may be different depending on which agency’s data is used to calculate it. Credit score may be provided as a FICO score or VantageScore:

FICO Score

The FICO score, used in part, most commonly, by about 90% of U.S. lenders, ranges from 300 to 850. A higher score generally simplifies loan approval and may secure better interest rates. It is based on five key factors:

1. Payment History (35%): Timely payments on credit accounts.

2. Amounts Owed (30%): The total amount of outstanding debt.

3. Length of Credit History (15%): How long your credit accounts have been active.

4. Credit Mix (10%): Variety of credit accounts, such as credit cards, mortgages, and car loans.

5. New Credit (10%): Recent credit inquiries and newly opened accounts.

VantageScore

The VantageScore model was created by the three major credit bureaus—Equifax, Experian, and TransUnion—as an alternative to the FICO score. It is designed to provide a more consistent and inclusive credit scoring system that aims to offer a comprehensive view of your credit health — especially useful for those with limited credit history. VantageScore also ranges from 300 to 850 but has slightly different criteria for calculation:

1. Payment History (41%): Similar to FICO, timely payments are heavily weighted.

2. Depth of Credit (20%): How established your credit accounts are.

3. Credit Utilization (20%): The ratio of your credit card balances to your credit limits.

4. Balances (11%): The total of current and outstanding balances.

5. Recent Credit (6%): Newly opened accounts and hard inquiries.

6. Available Credit (2%): Total available credit across all accounts.

How Rent Payments Affect Credit Scores

According to a recent Harvard study, 22.4 million U.S. households are now allocating over 30% of their income to rent, and 12.1 million are spending more than half. Adding rent payments to your credit report may significantly impact your credit score, especially if you're new to building credit. On their own, rent payments usually don't affect your credit score because landlords typically don't report them to credit bureaus. However, by rent reporting, you can ensure that your on-time rent payments are included in your credit history — helping build a positive payment history. The added information will build out the payment history on your credit reports, which constitutes about 35% of your FICO credit score and 41% of your VantageScore credit score.  Boosting your credit also can provide you access to loans with a greater range of terms and interest rates as well as other important offerings. This approach is particularly beneficial for those with limited credit history or those looking to rebuild their credit. While these services often come with a fee, the potential boost to your credit score can make it a worthwhile investment, making future borrowing easier and more accessible.

How to Report Rent Payments to Credit Bureaus

There are two primary options to getting your rent payments reported to credit bureaus: sign up for a rent reporting service on your own or encourage your landlord to sign up.

Sign up on Your Own:

You can enroll in a rent reporting service independently though depending on the service provider it may require your landlord to verify your lease and/or rent payments. You'll be responsible for paying the fee directly to the service. This fee can vary, ranging from a one-time payment to a monthly subscription, plus any setup charges. Although this is an added cost to your monthly expenses, the investment in these services may lead to substantial long-term benefits for your credit score and financial opportunities.

Have Your Landlord Sign Up:

According to RealPage’s 2024 National Multifamily Renter Study “97% of renters are interested in improving their credit scores and say their property managers should support their financial wellness.” Alternatively, you can encourage your landlord to sign up for a rent reporting service. These services often offer benefits to landlords as well, such as automatic payment collection along with increased renter satisfaction. In fact, a 2023 TransUnion Report found that 82% of renters surveyed would be more likely to pay rent on time if their payments were reported. It’s important to note that while you won't pay the service fee directly, your landlord may pass the cost on to you.

Choosing the Right Rent Reporting Service

Considerations and Concerns

When choosing a rent reporting service, it’s essential to evaluate the features offered. Look for services that include retroactive rent reporting, allowing past payments to be counted, as well as a refund policy and the ability to report to all three credit bureaus. Freddie Huynh, vice president of data optimization at Freedom Debt Relief, emphasizes that reporting to only one bureau only partially addresses the issue. Additionally, some services require landlord participation, which can pose challenges if landlords are unwilling to cooperate, especially if they charge extra fees.

It’s also vital to understand how different credit scoring models treat rent payments. For example, FICO 8 does not factor in rent, while FICO 9 and VantageScore 3.0 do, which can influence how lenders assess your creditworthiness. To make the most of these services, ensure your rent payments are consistently made on time and regularly check your credit reports for accuracy. Additionally, prioritize your privacy by selecting a service that follows strict data protection standards. Before signing up, take the time to read the privacy policy and consider enabling features like multi-factor authentication to safeguard your personal information. By being informed and proactive, you can enhance your credit profile while keeping your data secure.

Trustworthy Rent Reporting Services:

Finding a reliable rent reporting service can feel a bit overwhelming, but don’t worry! Here are a few options we trust that you can explore to find the perfect fit tailored to your needs.

• Self Rent Reporting

• Boom Pay

• Rental Kharma

• Rent Reporters

• PayYourRent

Rhino’s partnership with Self Inc. opens up valuable financial opportunities for renters.* Through Self's rent reporting service, renters may boost their credit scores simply by making on-time rent payments. Even for those who don’t yet qualify for Rhino’s security deposit insurance, this provides an easy and impactful way to build credit history and strengthen their financial profile.** Key Benefits May Include: 

• Free Rent Reporting: No extra costs, just connect and start building your credit. 

• Boost Your Credit: Customers may see an average VantageScore increase of 15 points.***

• Comprehensive Coverage: Includes rent, cell phone, and utility payments.

• Quick Updates: Payments typically report within 72 hours.

• No Landlord Cooperation Required: Renters can independently report their on-time rent payments without needing consent or involvement from their landlords, making it a hassle-free solution. 

Credit Building Companies 

Credit builder companies offer renters a convenient way to boost their credit scores by linking directly to their bank accounts. The service automatically tracks rent payment withdrawals by accessing these accounts, ensuring accurate reporting to credit bureaus. This streamlined process eliminates potential errors from manual entry and increases the likelihood that every on-time rent payment is recorded, reinforcing positive financial behavior. Essentially, this system bridges your bank account and credit report, making it easier than ever to influence your creditworthiness without traditional credit accounts.

Unlocking the Power of Rent Reporting

Boosting your credit score through rent payments unlocks valuable financial opportunities beyond just securing a place to live. With improved credit, you may qualify for more essential financial or insurance offerings.  By harnessing rent reporting services, your timely rent payments may contribute to your financial narrative — providing you potential access to more products with greater options on terms and interest rates. Take control of your credit story today with tools like Self Inc.’s rent reporting and watch your opportunities flourish. Ready to elevate your financial potential? Explore our partnership with Self Inc. now!

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*Rhino may receive compensation from Self Inc. if you sign up for their services.

**Results vary. You may not receive an improved credit score. Rent reporting services may not be used in certain credit scoring models.Payments may take two weeks or more to appear on your credit report.

***Disclosure: Based on a 2023 TransUnion study, customers saw a VantageScore® increase of 15 points on average. Results vary. You may not receive an improved credit score. Not all lenders, including auto and mortgage lenders, use scores impacted by rent/utility payments. Not all bill payments may be eligible. Other factors, including activity with other creditors, may impact results.