Renters who pay their rent on time each and every month may soon find their credit scores getting a nice boost.
If you are a homebuyer and you have a mortgage, that mortgage is reported to the credit bureaus each month.
But if you are a renter -- which is nearly 1 out of 4 of us -- your rent payments have historically only been reported if they're delinquent and have gone to collections.
So being a renter could only harm you, not help your credit. A good payment history on rent has never been reported…until now.
Two credit bureaus are on board with the new plan
Experian and TransUnion have both begun incorporating rental payments into credit files, and then in turn, into your credit score.
Syndicated writer Kenneth Harney reports that renters who are having their on-time payments reported are seeing a significant increase in their credit scores after just 1 month!
Of course this works both ways. If you don't pay your rent on time, it will hurt your credit score.
It's been a mystery to me why Equifax is not participating in initiative. We've reached out to them, but there's no explanation as yet.
This whole concept goes back to the idea of expanded credit score. Many people don't have traditional forms of credit. So if you track utility bills, bounced checks, and other measurements, the belief is that would also indicate how well someone would handle a line of traditional credit.
This is all good news for renters, who have historically paid higher rates for insurance and sometime had trouble with job offers because not having a mortgage hurt their credit score.
It's such a mystery why the system has punished renters for so long. It makes no sense. But now I'm happy to report times are changing.