Renters get help boosting credit scores

This post comes from Brian O'Connell at partner site MainStreet.

 

Back in January, one of the major credit-reporting agencies, Experian, announced it would begin including rental payments in its credit score formula.

 

In response to Experian's decision, a cottage industry of websites has arisen to help consumers make the most of their rental payment from a credit score angle. Williampaid.com, for example, will not only pay your rent for you automatically -- it deducts your payment from your bank account for a $1.75 monthly fee -- it will also report your rental payment to FICO, the main credit-monitoring firm, for $2.50 per month.

 

There's also a new website called RentReporters.com that opened its digital doors on Monday. The site says it can verify residential rental payments of 100 million U.S. renters and transfer that information to consumer credit reports, thus helping them to boost their credit scores. (Estimate your credit score for free.)

 

RentReporters takes the rental-payment receipts straight from the landlord and delivers the payment data to credit bureaus for inclusion on consumer credit reports, for $89.95 per year or $5.95 per month after paying a $39.95 setup fee.

 

RentReporters sends its rental-payment verifications to Payment Reporting Builds Credit, an alternative credit-reporting agency that processes rental-payment data for FICO. That data is transmitted directly into the automated underwriting systems of national lenders.

 

"Having been where many of our customers are now, I know firsthand the economic circumstances that can result in a poor credit score," says Crispin Luna IV, founder and president of RentReporters. "We allow essentially every renter in the U.S. to take one step closer to homeownership and leverage their rental payments towards a better credit profile."

 

100 million renters

While it's just Experian right now, RentReporters expects the two other credit-scoring titans to begin including rental payments shortly.

 

"The significance of the shift from debt-based credit and the impact it will have on the American credit market is huge," adds Luna. "There is no doubt that in the near future Equifax and TransUnion will soon announce the inclusion of rent on their traditional databases."

 

Experian estimates that there are about 96 million renters in the U.S. -- more than enough to impact the credit and lending markets in a big way in the coming months and years. (The Census Bureau estimates about 100 million renters.)

 

"Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent," Brannan Johnston, vice president and managing director for Experian RentBureau, said in a press release in January. "Our research shows that over one in three consumers in the highest-risk credit score band will improve to at least the next score band with the addition of positive rental data."

 

For now, renters have enough resources to leverage their on-time payments into higher credit scores. The question now: How many will do so? With rentals on the rise, more companies will spring up looking to make a buck on the trend.

 

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