Are Tradelines Legal To Boost Credit Scores?

Talkin go money

You may not realize it, but when you rent a house or apartment, some credit bureaus include your rental history in their credit score calculations.

That hasn't always been the case, and it represents a huge change in the data going into the personal credit scores of the nearly 95 million U.S. renters identified by the National Multifamily Housing Council (approximately 35% of all U.S. households) . Previously, landlords and property managers may have provided negative rental payment data to credit score agencies. But since they did not provide positive rental payments, those payments were not hooked up to credit score calculations, and these payments did not increase your credit score.

For example, credit giant Experian added positive rental payment histories to its credit score ratings in 2010. TransUnion also reports positive rent payments in its loan calculations (look under "Tradeline costs" for your credit report.)

That could be a change for consumers, especially younger ones in their 20s just starting to build good credit profiles. Previously, such an option was not available, so a tenant's positive rental history would not help improve a credit rating.

What should you know about how your rental payments are affecting your creditworthiness - and what can you do to get maximum benefit from a good payment history?

Know the score

Experian includes positive rental payment data in its credit reports through its Experian RentBureau division. This enables consumers to build or build a credit history through timely rental payments, says Emily Christiansen, director of Experian RentBureau. "Paid rental payment information is included as a Tradeline on a consumer's Experian credit report and can be included in certain credit scores such as VantageScore and Experian PLUS Score."

Adding positive rental payment dates to Experian credit reports can be a tremendous benefit to anyone who rents, especially non-credit, cash-based consumers, adds Christiansen.

Make sure your rents are not counted

Not all landlords report the payment details to the credit bureaus, so you should check whether this is the case. "If consumers are currently renting out or considering renting out, they should ask their property management company to report the payment details to Experian RentBureau," says Christiansen. "In the event a property management company reports historical data, the historical positive rent data can be included in Experian consumer accounts payable reports."

She adds that consumers renting from a single landlord or property management company that is not reporting can sign up to Experian RentBureau through a rental service. "These services allow rent to be paid electronically and allow consumers to log in." to report rental payment data to Experian, "added Christiansen.

According to John Heath, senior attorney at Lexington Law, a statewide law firm specializing in helping consumers with credit and debt problems, there is no secret about how rental payments can build credit. Just make your payments on time, every time. Agencies that track rents pay attention to your history, says Heath. "This can be a really good thing when you have a positive rental-payment history because it can hold up or help increase your credit score," he notes.

"The most important thing a tenant can do to improve their guests is paying the rent on time," explains Heath. "But if the tenant is late for any reason (for a period of 30 days or more) (including legitimate reasons to withdraw the rent because the rent has no water or heat) it could result in a reduction in the tenant loan result. "

How many rental payments are affecting your credit

The impact of rent payments depends on your situation, explains Heath. "About 35% of your credit score is based on your payment history," he says. "If your rental history is a large part of your payment history, it can have a significant impact on your creditworthiness. Conversely, if your rental payment is a smaller part of your payment history, it has a smaller impact on your creditworthiness."

Heath notes that rent credit visibility affects the leverage that renters have historically had on landlords who did not maintain their property. Broken equipment, insect infestation, or poor snow removal services can cause the renter to withhold payment until the problem is resolved. Now if a tenant withholds the rent - and this information is passed on to a TransUnion or Experian - that tenant could be penalized with a lower credit score.

If this happens to you, make sure you document the problem and why you withheld the rent until the situation was corrected. Send the information in writing to the rating agencies, particularly Experian and TransUnion, so that it appears on your credit report. There, lenders can see and document your statement as they make credit and credit decisions.

The bottom line

With monthly rental payments a core component in some credit scores, renters should take steps to use these expenses to build a stronger credit score.