Rent and Your Credit Score: What You Need to Know

New reporting services can help get rent payments applied to building good credit.

For too long residents have begged the question: If my utility bills and other obligations like car and cell phone payments count toward my credit score, why doesn’t my rent? Finally, in response to growing public demand, it looks like that’s about to change in California. Could this be the start of a nationwide shift? Let’s take a look at what that could mean for the affordable multifamily industry and residents.

Under a new California law (SB 1157), multifamily operators who own certain government-subsidized properties will be required to give residents the option of having their rental payments reported to a major credit bureau. The law will take effect July 1, 2021, and applies to landlords of rental housing developments with more than 15 units that receive certain types of government assistance. The law authorizes landlords to charge residents the lesser of $10 per month or the actual cost to provide the reporting service. residents will be allowed to opt-in or opt-out of rent reporting at any time, subject to certain requirements. But most importantly, it gives them the opportunity to build credit and improve credit scores by incorporating on-time rent payment records into their credit histories.

So just how many people will this affect? Approximately 44.1 million or 35.9 percent of U.S. households rent their homes, and as many as 109 million Americans live in rental housing nationwide¹. California has the highest number of rental units, the third-highest rentorship rate (45.1 percent of households) and the second-highest median gross rent ($1,614) in the nation². Many people who don’t have much credit history do have a history of paying rent on time, but that information doesn’t show up on their credit reports or help their credit scores. The Credit Access and Inclusion Act provided an initial framework that affirmed the legitimacy of rental and utility payments as viable data to be furnished. This act helped fuel the creation of the California bill, which has caught the attention of other state and city governments– indicating this national issue should be part of the larger multifamily housing discussion.

Domuso’s Credit Reporting Solution

Domuso’s integration with Resident-Link offers residents the benefit of building credit while enjoying award-winning fraud and identity protection services. Our user-friendly digital payment platform makes it easy for property managers to implement by linking directly from inside the resident portal, and residents gain the ability to access their credit and payment information from a single location.

Resident-Link also offers credit reporting services. Once opted-in, all members get exclusive features like positive rent-payment reporting, discounted credit report and score, positive credit alerts, and Experian credit monitoring. With the RapID Pro® Plus plan, you can also get additional security and benefits such as TransUnion and Equifax credit monitoring and full Experian credit report with credit score.

Signing-up is quick and easy, and your protection begins immediately. Each community has their own branded webpage for their residents. Simply choose the level of protection that you desire, input your personal information, and enjoy the peace of mind that comes with knowing your identity is protected.

How to Get the Most Out of Credit Reporting

All three major credit bureaus – Equifax, Experian and TransUnion – will include rent payment information in credit reports if they receive it. The two major credit scoring companies, FICO and VantageScore, vary in how they handle rent payment information. The most commonly used versions of the FICO score don’t use rent payment information in calculating scores, but newer versions of FICO, as well as VantageScore, do consider such information if it is already in your credit report. It’s best to check and see if your property manager already has a rent payment credit reporting service in place.

Now California residents finally have the opportunity to build and improve their credit score as part of the rent payment process. Simply paying your rent still won’t help you build credit, but reporting your rent payments can – especially if you don’t have much credit history or experience. Plus, having rental payment information in your credit report can be useful in the long-term for finding future rentals, as landlords and leasing managers often prefer residents who can show a history of paying on time.

If you’re interested in learning more about Domuso’s integrated credit reporting solution capabilities, we’re here to help! For information about activating the Domuso and Resident-Link integration solution for your property, please contact [email protected].