Can Rental Data Help Establish Your Credit?

Financial blogger Ash Cash offers a unique alternative that might help you get a credit score for the first time.

In the not-too-distant past, people wanting to establish their credit were only able to do so through bank loans, credit cards, auto loans, mortgages, lines of credit and other bank lending products. If you didn't have credit, it was difficult to get credit, as most financial institutions preferred to see some credit history on a credit report before making a lending decision.

Talk about a Catch-22.

As a result of this scenario, advocacy work was begun to give motivated and responsible people a shot at creating a positive credit history for the first time. The question was often posed, "If people were taking care of their financial obligations each month, couldn't some of that data be captured to generate credit information?" Especially for those just starting out - college students and other young adults juggling many new responsibilities - there had to be a way to start counting all the good, regular payment behaviors they were starting to form. Recognizing that responsible folks were missing out on getting credit for consistently doing right by their commitments just didn't seem right.

For many years, teams at Experian were on the forefront of the movement that advocates for full-file reporting, which means it supports the use of alternative data — such as rent payments, utility payments, and cell phone bills — for credit reporting purposes. Their goal: making credit available to those previously unable to compile enough credit history to generate a credit score.

In 2010, Experian acquired RentBureau, a specialty credit reporting agency that focused solely on rent payments. Experian recognized that positive rental data was missing from consumers' credit reports and that the positive rental information had the potential to make previously unscorable residents eligible to have credit scores. Experian's RentBureau allows property managers and other third parties to upload rent payment information, whether positive or negative, directly to Experian.

A recent study by Experian confirmed that reporting positive rent payments adds worthwhile volume to credit histories, can help credit scores, and can allow some of those who were previously unscorable to receive a credit score for the first time.

How does paying rent on time help build your credit history? While timely rent payments are not currently factored into your credit scores, Experian has decided to incorporate on-time rent payments on your Experian credit reports. It may also consider them in certain credit scores. This is good news for first-time renters who want to establish their credit and begin growing it, as the presence of this new information can signal to lenders that the applicant is successfully managing more financial obligations than they might have seen or known about before. Check with your landlord to see if they currently report on-time rental payment information, and if they don't, make the request to see the good that it may be able to do for you.