How paying rent can boost your credit score by 60 points

Renters make up more than a third of the U.S. population. But when it comes to building wealth and credit, they're often locked out. Not only are renters unable to accrue home equity, but because rental payments aren't usually reported to credit bureaus, they also miss out on a chance to grow their credit history.

Housing is the largest monthly expense for most people, which means millions of Americans' financial behavior isn't accurately reflected in their credit file.

Rent reporting services aim to change that. For a fee, companies like Boom, RentReporters and Rental Kharma will verify a tenant's payment history and send a record to one or more of the credit bureaus to be factored into their FICO and VantageScore algorithms. 

According to a September report from TransUnion, more than three-quarters of consumers who reported their rent saw credit scores improvements, with an average increase of nearly 60 points.

"There is a logistical problem for the bureaus to receive rental data from landlords since there are so many landlords and many of them are too small to bother with," says Jim Droske, president of Illinois Credit Services. "So, rent reporting companies have recently stepped in to fill the gap."

Some landlords and property managers are already connected to platforms like TurboTenant or Bilt, and tenants can just opt in for no fee. But you can also link your bank account to a rent-reporting service, which will confirm your payment history and establish a rental tradeline (credit report entry) that should be added to your credit report within 30 days of your first payment being reported.

• Read more: The best renters insurance companies

Many rent-reporting services also offer retroactive reporting, allowing you to add up to four years of past rent payments.

The rent reporting company is basically an intermediary between a property management company and the credit bureaus," said credit expert John Ulzheimer. "They will report the fact that you have a lease obligation and that you're making your rental payments in a timely fashion to satisfy that lease." 

Among those with the most to gain from rent reporting are the nearly 49 million adult Americans who don't have a credit score to begin with. More than half (53%) are "credit invisible,” or have nothing on file with Equifax, TransUnion or Experian. The remainder are considered “unscorable” because there’s too little information available. 

A 2021 TransUnion analysis found that, once rent payments were included, 9% of unscorable users became scorable. (Their average FICO Score rose to 631, which is considered “fair.")

“If someone has a ‘thin’ credit profile — meaning no other credit or limited credit — then rent reporting can be a good thing,” Droske told CNBC Select. "But it doesn't mean it's a catchall for every situation."

If you already have an established credit history with a mix of loans and credit cards, adding rent may only result in a small bump, if any. 

"I've had credit for 40 years, so it's silly for me to have rent added to my credit file," Ulzheimer added. "Someone who's young, who doesn't have a credit card or student loans, would benefit. Because now all of a sudden they have a credit report with a positive mark on it."

Still, rent reporting isn't a silver bullet that can reverse a history of bad credit, according to Ulzheimer.

"What will reverse that is making payments on all of your other obligations," he said. "Stop missing payments and stop defaulting."

There are many legitimate platforms with varying fees and services. For about $3 a month, Boom will report to all three credit bureaus. It only includes positive payment history, so late or missed rent isn’t included. RentReporters charges $11 a month, but includes up to 48 months of past rent history, making it one of the most comprehensive options. 

If you're considering a rent-reporting service, ask yourself these questions:

1. What is being reported? Does the service only report on-time rent payments, or will it also send details about missed and late ones?
   
2. Who needs to be involved? Some rent reporting services require your landlord or property manager to verify payments, while others allow renters to self-report by submitting bank statements or other proof.
   
3. Who receives the data? Not every service reports to all three credit bureaus. Rental Kharma, for example, reports only to TransUnion and Equifax. 
   
4. What else does it do? Some rent-reporting services offer other benefits, including credit monitoring, monthly credit reports and utility payment reporting.
   
5. What's the total cost? In addition to a monthly fee, some providers charge a one-time setup fee of up to $100. There are free options, like *Experian Boost® and Self, but they usually only report to one credit bureau.

At CNBC Select, we work with experts who have specialized knowledge and authority, grounded in relevant training and experience. For this story, we interviewed Jim Droske, president of Illinois Credit Services. Before launching his credit repair service, Jim spent nearly 20 years in the mortgage and automobile lending industries. He received a Bachelor's in marketing and management from the University of Illinois at Chicago.

We also spoke with John Ulzheimer, a nationally recognized expert on credit reporting, credit scoring and identity theft. John frequently contributes credit advice and analysis for various outlets, including CNBC, USA Today, the Los Angeles Times, the Washington Post and CNN.

At CNBC Select, our mission is to deliver high-quality service journalism and comprehensive consumer advice to our readers, enabling them to make informed financial decisions. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties, and we pride ourselves on maintaining high journalistic standards and ethics.

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*Results vary. Some users may not see improved scores or approval odds with Experian Boost. Not all lenders use Experian credit files and not all lenders use scores impacted by Experian Boost.