Can You Build Credit by Paying Rent?

You pay your rent every month, so it would be great to be rewarded for it, right? After all, many of your other monthly payments contribute to your credit rating, so shouldn’t your rent count for something too?

Thanks to rent reporting services like Borrowell Rent Advantage, you can now build your credit score by paying your rent on time every month. Plus, Borrowell now allows you to report up to two years of past rent payments, as well as your ongoing ones, allowing you to extend your credit history.

In this article, we’ll take a deep dive into what rent reporting is, how it works, and the pros and cons of sharing your rent payments with the credit bureau each month. Let’s dive in!

What is Rent Reporting?

Rent reporting is a term for when your rent payments are reported to the credit bureaus so the data can go on your credit report and be used to calculate your credit score. 

Unlike accounts like credit cards, loans, and even cell phone plans, your monthly rent payments aren’t typically reported to credit bureaus unless you make use of a rent reporting service and request that the data be shared each month. 

How Does Rent Reporting Work?

There are a couple of different ways your rent can be reported to the credit bureau: through FrontLobby or with Borrowell’s Rent Advantage program. 

FrontLobby

Benefits of reporting rent with FrontLobby:

• Reports to Equifax

• Helps you build your credit history with your rent payments

Downsides of reporting rent with the Landlord Credit Bureau:

• Requires cooperation from your landlord, which can be awkward

• Doesn’t allow you to report past rent payments, only current and future ones

FrontLobby has a partnership with Equifax enabling them to report rent payments to the bureau if tenants opt-in to the service. To use this service, you and your landlord must make profiles with FrontLobby; a consumer reporting agency. Once your accounts are set up, your landlord can report your rent payments to Equifax along with notes on whether they were on time or how many days late they were. 

The downside to rent reporting with FrontLobby is that it requires cooperation from your landlord. Depending on your relationship with your landlord, you may not feel comfortable asking them to enroll, and in some cases, they may be unwilling to participate in this program. 

But don’t worry, you still have options. 

Borrowell Rent Advantage

Benefits of reporting rent with Borrowell Rent Advantage:

• Reports to Equifax

• Helps you build your credit history with your rent payments

• You can add up to 24 months of past rent payments in one go

• No landlord cooperation needed!

Borrowell's Rent Advantage is another way you can report your rent payments to Equifax to help build your credit score. A big perk of Rent Advantage is that it doesn’t require cooperation from your landlord. You can enroll in this program on your own and reap the rewards of rent reporting without involving your landlord at all. 

You can enroll in the program through your Borrowell account, connect your bank account, and input your lease details to begin reporting rent payments. Rent Advantage uses your electronic bank records to verify your rent payment data and report it to Equifax. You will have to log into your account each month and confirm your rent payments to ensure they are reported to the credit bureau.   

There is no hard credit pull required to sign up for Rent Advantage, and you can leave the program any time you wish, without penalty. However, demonstrating positive payment history over a sustained period is best for your credit score, so we recommend sticking with the program for a minimum of 6 months. 

How Does Rent Reporting Help You Build Credit?

Rent reporting can be beneficial in building credit by contributing to your credit mix and your history of on-time payments. 

As you know, lenders like to see that you can manage different types of credit accounts (including revolving and instalment accounts), and your rent payment will contribute to your account diversity.  

Additionally, assuming you pay your rent on time each month, your payments will count toward your on-time payment history, which makes up 35% of your overall credit score. The more positive payment history you have, the better!

Reporting your rent can also help build out your credit history, meaning the average age of all of your accounts, which accounts for 15% of your credit score. Lenders like to see that borrowers have managed accounts responsibly for a long period of time (usually, a minimum of 2 years), and reporting your rent is a great way to demonstrate account longevity. Plus, with Borrowell, you can now report up to two years of past rent payments in one go, so you can instantly extend your credit history.

How Long Will it Take for My Score to Improve?

Once you begin reporting your rent payments, you should see an increase in your credit score within a few months.

Account data is typically reported to credit bureaus once per month, but sometimes there’s a slight delay in reporting when a new account is opened. Once your rent payments begin to appear on your credit report, it will likely take 30 to 60 days before you see an uptick in your score.

If you are using Rent Advantage, your rent payments will be reported to Equifax on the last business day of the month following your rent payment. In other words, your July rent payment will be reported on the last business day in August. 

Remember, rent payments are reported to Equifax, so they will affect your Equifax credit score but may not be reflected in your credit score from other bureaus. 

What Are The Benefits of Reporting My Rent?

Reporting your rent is an easy way to give your credit score a boost. If you’re new to building credit, rent reporting enables you to add data to your credit report without taking on additional debt, such as a credit card or instalment loan. Here are a few of the benefits of reporting your rent each month.

• Building your payment history: If you don’t have any history of payments on your credit report, it may be difficult to qualify for credit products, including things like a cell phone plan or a credit card. By reporting your rent, you can begin building a payment history which will give lenders the confidence to approve your credit applications in the future.

• Access to better interest rates: Building your credit score enables you to secure lower interest rates, making it more affordable to borrow money. Whether you want to open a credit card account or qualify for a car loan, reporting your rent is an easy way to help whip your credit score into shape.

• Higher credit limit: As you build a positive credit history, you’ll qualify for better credit terms and higher borrowing limits. This will make it easier to keep your credit utilization rate low while offering plenty of spending room for emergency expenses. 

• Position yourself as a great tenant: Landlords use your credit score to help determine whether to approve you for a rental, but a clear history of on-time rent payments will help too. While your solid credit score should be enough, having clear evidence of timely payments leaves no questions unanswered. Next time you’re looking for a rental, this could help you stand out in a competitive market.  

What Are The Drawbacks Of Rent Reporting?

As with any credit reporting, there can be drawbacks to reporting your rent if you are unable to make your payments on time. 

Late rent payments will be reflected on your credit report and will damage the payment history segment of your credit rating, which accounts for 35% of your score. Since reporting rent payments is optional, you should only do it if you’re confident that you can make your payments on time. 

A history of late payments will lower your overall credit score and make it harder to qualify for future credit products. To be on the safe side, ensure you have a couple of months of rent saved up before enrolling in a rent reporting service, so you don’t get caught in a bind and risk making a late payment. 

How to Choose a Rent Reporting Service?

Before choosing a rent reporting service, read through their documentation thoroughly to ensure you choose the option that works best for you. Here are some questions to keep in mind as you go:

• Does the program require landlord cooperation?

• Is there a cost to use the service? How much?

• What are your responsibilities within the program? Do you have to complete a reporting task each month?

• Does the program allow you to report past rent payments, as well as current and future ones?

• Are there penalties for withdrawing from rent reporting? If so, what are they?

Canada’s first rent reporting service was through FrontLobby, but the downside of that program is that it requires cooperation from your landlord, which isn’t always realistic. 

If you’re looking for a way to report your rent payments without having to ask your landlord to sign off, consider enrolling in Borrowell’s Rent Advantage program. 

The Bottom Line

If you’re making on-time rent payments every month, you might as well use them to help build your credit score. A higher score will pay dividends down the road whether you’re looking for your next rental, applying for a mortgage, or any other type of credit product!