Does Paying Rent Build Your Credit?
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Key points about: building credit with rent payments
Rent payments that are reported to credit bureaus may build your credit if you consistently pay on time.
Landlords don’t automatically report rent payments to credit bureaus.
Some landlords may offer a rent-reporting service option that you can choose if you want your payments reported.
When you pay a bill on time every month, like your credit card, you might expect that your payments will automatically appear on your credit report and boost your credit score. However, rental payments for an apartment are not always treated the same. For a rent payment to build your credit score, the payment needs to be reported to a credit bureau. If you want your monthly rent payment to affect your credit score, there may be steps you can take to initiate rent reporting
How does a payment help with building credit?
Your credit history determines your credit score, and using credit responsibly can help you build good credit. People with a good credit score usually pay bills on time and don’t carry balances that are a large percentage of their available credit.
Not every recurring payment you make gets reported to credit bureaus. Rent, utility payments, and phone bills are some of the monthly bills that don’t usually get reported. In order for rent payments to be included on your credit report, they need to be reported to a major credit bureau (Experian, TransUnion, or Equifax).
When does your rent payment get reported to a credit bureau?
While a payment made directly to your landlord might not become part of your credit history unless your landlord lets you request rent reporting, putting rent payments on a credit card also lets you build credit by paying your rent.
Paying rent with a credit card
When you put a rent payment on a credit card, it won’t get reported as a single payment to a credit bureau, but the amount of your rent will be included in the total balance reported for that credit card. For most people, rent is one of their larger expenses, so adding your rent to a credit card might mean you’re using a large proportion of your available credit. Because your credit score is affected by your utilization ratio, which is the percentage of available credit in use, your score could go down.
Your credit score could also go down if you pay the bill late. However, if you pay your credit card bill in full and on time, that can help you build your credit history.
Did you know?
Many landlords charge a service fee when you pay rent with a credit card, so you’ll want to calculate whether the rewards you can earn offset the fee. For example, the Discover it® Cash Back Card lets you earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn 1% cash back on all other purchases–automatically. And with Discover Cash Back Match®, Discover will automatically match all the cash back you’ve earned at the end of your first year1–so if you earn $150 cash back, we’ll give you another $150.
Paying rent with a check or cash
In most cases, rent payments made in cash or by check aren’t reported to a credit bureau. However, some landlords offer you the option of requesting that your rent payments be reported to a credit bureau using a credit reporting service. Even if your landlord doesn’t offer the option, you may be able to sign up for a rent-reporting service directly, and they will report your monthly rental payment.
If you sign up to have your monthly rental payment reported to credit bureaus, your rental payment history can boost your credit score if you make your rent payments on time. However, paying rent late can lower your credit score if your landlord reports the payments.
If you’re not confident that you can make a timely payment every month, it may be better not to ask your landlord to report your rent payments to a credit bureau. A late payment is one of the biggest factors that can hurt your credit score, so if you’re trying to build credit, you should be sure any reported monthly payment will be on time
Pros and cons of using rent payments to build your credit history
If your credit score is low or you don’t have any credit history, and you always pay your rent on time, adding that payment history to your credit report can help you build credit. But if you occasionally pay your rent late, having your landlord report your rental payment history to credit bureaus might lower your credit score and lead to poor credit.
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