Can Rent and Utilities Improve Your Credit Scores?
For decades your credit reports have contained a record of how well you
paid your credit obligations. More specifically, this primarily meant
your credit cards and loans. What had been missing from credit reports
for well over 100 years was any record of how well you paid rental
obligations for apartments or homes, and almost all of your utility
bills. Slowly but surely, that is changing.
Over the past several
years a number of options have popped up to assist consumers who rent
rather than own to benefit from making their rental payments on time. Of
course, in order for your credit to benefit from proper rental
management a record of such payments has to make its way to your
consumer credit reports as maintained by Equifax, Experian and
it was up to your creditors to provide information about your
liabilities to the credit reporting companies. This process is formally
referred to as “data furnishing” and companies like banks and credit
card issuers are referred to as the “data furnishers.” In the past, in
order for your rent or any other non-traditional credit activity, like
utilities, to end up on your credit reports a landlord, a property
management company, or a utility service provider had to furnish it, and
almost none of them did so.
And because your rent and other
unreported liabilities were never furnished to the credit reporting
companies, your credit scores could not benefit. It was the credit
equivalent of the tree falling in the woods. Nobody heard it.
More Consumer Control Evolves
is a trend evolving which gives consumers some control over the credit
reporting of non-traditional credit accounts. For example, Experian Boost
is available to help you add your utility and mobile phone accounts to
your Experian credit report. This is an example of what’s being called
consumer controlled or permissioned data. You choose and control whether
or not it’s added, and for how long it’s reported.
Several years ago
Experian acquired a company called RentBureau. RentBureau was
essentially a credit reporting database but for landlords and property
management companies. After the acquisition Experian added millions of
rental records to their credit file database, which now appear on
consumer credit reports.
And finally, there are third-party
intermediary companies like RentalKarma and RentReporters which, for a
fee, purport to report your rental history to one or more of the
national credit reporting companies. By doing so, this might improve
your credit scores and help to build or rebuild your credit reports.
Impact on Credit Scores
scoring systems, like the VantageScore credit score, have to be
designed and developed to see and consider non-traditional credit
information, like rent and utilities. Unfortunately, older generations
of commonly used credit scores do not consider rental information. So,
in practical terms, the information is neither helping nor hurting your
credit scores if they’re being calculated by some older scoring models.
All VantageScore models do consider rental and utility accounts if that
information resides in your three credit files.
tried Experian Boost. I added my power and gas utilities to my Experian
credit report. My score went up 5 points. It cost me a grand total of
zero dollars. I’ll take it!
Should I Add Rent or Utilities?
benefit of adding non-traditional scorable information to credit
reports isn’t for everyone. If you’re sporting a VantageScore of 820,
you don’t need to add your power bill to your credit report. Your scores
are fine and you’re likely getting the best deals lenders have to
If, however, your scores are at or below the national average,
a number that varies between 675 and 700-ish, then adding something
positive to your credit reports could be the difference between an
approval or a denial. Or, at the very least, the score improvement could
mean a better interest rate or a higher credit limit.
news about these consumer controlled options that you can choose to
participate, or you can choose to not participate. Moreover, none of the
available options are permanent. For example, if you try Experian Boost
and your score doesn’t go up at all, then you can shut it down. If
adding rent to your credit reports didn’t help your scores enough, then
you can cancel your subscription.
Disclaimer: The views and
opinions expressed in this article are those of the author John
Ulzheimer and do not necessarily reflect the official policy or position
of VantageScore Solutions, LLC.