Borrowers who have a history of paying rent on time may see a boost to their credit score.
Experian, a leading credit report company, added a section to its credit reports last year that reflected on-time rent payments, which helped give a boost in the credit scores to some on-time rent payers. Now the two other major credit reporting companies are following suit.
CoreLogic and FICO recently announced they are also adding a score that reflects payment histories from landlords, The New York Times reports.
“Evidence of positive rental payments could be a plus for consumers,” Joanne Gaskin, FICO’s director of product management global scoring, told The New York Times.
Nearly half of high-risk consumers saw an increase of 100 points or more after their rental history was added to their credit report, says Brannan Johnston, the managing director of Experian’s rent bureau. Consumers with average or higher credit scores, on the other hand, did not see any major difference to their scores.
For former home owners who lost their homes to foreclosure, they may be able to rebuild their credit histories more quickly now by showing they are “very responsible renters,” Tim Grace, senior vice president of CoreLogic, told The New York Times.
Commentary from Bob Karp of Karp Properties: for too long renters haven’t been getting the advantage of their on-time payments being included in their credit history. It looks like that is about to change. Many people rent while they save up money for the down payment on a home. It is important to remember that paying rent on time is a way to build a good credit “reputation”.