Reporting on-time rent payments from public housing residents would boost credit scores for many who have low credit ratings or no credit file at all, a recent federal study has found.
Researchers examined the credit scores of about 10,000 tenants living in public housing in the Cook County, Illinois; Seattle and Louisville, Kentucky areas. Adding rental payment data to credit files generally raised credit scores for tenants and dramatically reduced the percentage of those who didn’t have enough credit history to be scorable, according to the October 2019 joint study by the Department of Housing and Urban Development, the Policy and Economic Research Council and Fair Isaac Corp.
Want to know more?
Why could rent reporting matter?
All three major consumer credit bureaus already include rent information in credit files — provided landlords and rental companies report the data to them. TransUnion and Equifax use full-file rental reporting, and Experian uses positive-only rental reporting, for their respective main consumer databases. And some newer credit scoring models like VantageScore 3.0® and FICO® Score 9 use any reported rent payment info in the calculation of credit scores.
A May 2019 TransUnion survey found that many renters were interested in having this data reported. But according to the HUD study, few property managers report positive payment information. And only a few businesses — such as utilities and media companies — report positive payment information to credit reporting agencies.
The Consumer Financial Protection Bureau estimated in a 2015 report that about 45 million Americans either have no credit file or a “thin” file that leaves them without a credit score under traditional credit scoring models. The HUD study finds that many public housing tenants could benefit from the addition of rent reporting to their credit files, which could provide them with greater access to credit and less need to rely on high-cost lenders.
According to the study, consumers who saw their credit scores increase to above 620 in the modeling used for this study might see benefits from a higher credit score, including the ability to qualify for federal mortgage programs and the potential for more affordable access to credit.
The study also notes the business case for rental payment reporting, which may encourage greater on-time payments.
What can you do to work on your credit while renting?
If you’re a renter looking to improve your credit but your landlord doesn’t report your payments, you have some options.
- Ask your landlord or rental company to begin reporting your payment history.
- For a small monthly fee, there are services that can report your rent payments to the three major credit bureaus. Of course, you may see a benefit from this only if your rent payments are on time.
- For a free approach, you can try Experian Boost, a service that links to your bank account to report utility and phone service payments. While this service reports only to Experian, it could be a way to work on your Experian FICO® 8 credit score.
One no-cost option is to sign up for Credit Karma, where you can check your VantageScore 3.0® credit scores from TransUnion and Equifax on Credit Karma along with your credit reports from Equifax and TransUnion any time.