Last month, I talked about my new chosen lifestyle of renting vs. owning my home. My new life as a renter includes learning that you might want to always opt for the top floor (if you can) – sometimes even the smallest person can make a surprising amount of noise. Nevertheless, I am enjoying my new life as a former home owner.
Quite honestly, I don’t miss the amount of weekend work that went along with my former home. I don’t miss the higher utilities or the ever-increasing real estate taxes. I also don’t miss the “politics” that would sometimes play out within our condo association. But there is one thing I do miss – the ability to keep my good credit score high with the reporting of my timely mortgage payments to the three major credit bureaus, Experian, Transunion and Equifax. Renters have never had their rent payments reported like homeowners have, missing the opportunity to build a good credit file and increase your credit score – until now.
In June 2010, Experian acquired RentBureau, and in December Experian became the first credit reporting agency to include positive rental payment histories on its credit profiles. RentBureau is the largest and most widely used credit bureau for the multifamily industry. In my opinion, this is a positive step in the right direction to reward tenants for their good payment history – but not all tenants can take advantage of this. RentBureau is currently making reporting services available only to property managers that have 500 units or higher. I for one am not a tenant of a large professionally managed property. My building has 60 lofts – not small, but not large either. So what about those of us who might be renting from a wonderful, but much smaller landlord?
As I began to research this issue, I discovered that there are “services” that will report your timely rent payments to credit reporting agencies – or do they? The beauty of the internet is that you can find out just about anything you want to know about any subject within a matter of minutes. The downside of the internet is that anyone can launch a website and a “business” that may or may not deliver the promised service. Such rental reporting “companies” do exist and one I discovered had an F rating from the Better Business Bureau as well as several unresolved complaints. All promised to help you raise your credit score by reporting your timely rent payments – for a small fee. Some apparently collected the fees, but did no reporting. Consumers paid, but saw no benefit to their credit file. Does the word scam come to mind?
But through my research I did find an accredited company with the Better Business Bureau with an A- rating called www.williampaid.com .The company offers several levels of service including an automatic online rent payment deducted from your checking or savings account for the small cost of $1.75 per month. For an additional fee of $2.50 per month Williampaid will report your timely rent payments to the credit reporting agency, PRBC. At the end of 2007 Fair Isaac, the creators of the FICO score, formed a partnership with PRBC to deliver the PRBC credit report with the FICO Expansion Score. The FICO Expansion Score enables U.S. lenders to confidently assess the credit risk of nearly 50 million Americans who have little or no credit information at Equifax, Experian and TransUnion – a step in helping non-homeowners build or maintain a good credit file. Williampaid also offers the ability to pay your rent via a credit or debit card, but I feel the 2.45% of the rent amount is too high for that service. A $1,000 rent payment would cost you $24.50 to use your credit or debit card – use your checking or savings instead.
Are you a new college graduate or a young person just entering the adult world for the first time by renting your first apartment? Williampaid also offers a service known as a Roommate Agreement. This document is meant to protect roommates from disagreements and/or legal battles and under this agreement Williampaid will allow each roommate to pay their appropriate share of the rent, but with only one check going to your landlord. This may be a great option for new college graduates that are rent sharing and would like to start building a credit file. Another service offered is Bill Verification, which for a one-time fee will allow you to verify past payment histories so that you can build your credit score faster. If while in college you made timely rent payments to your landlord, but didn’t have the opportunity to have them reported, you may wish to take advantage of that service to jump start your credit file.
I am not specifically making a recommendation for Williampaid, or any other comparable service. But having a good Better Business Bureau file is a start. There may be other companies that offer the same services and are reputable as well. Do your research and work with the companies that are willing to put their fees directly on their website. Some did not – what are they trying to hide? Additionally, those companies seemed to be the ones with consumer complaints. Building a good credit file is an important tool in your financial life, but be a smart consumer first.
As for my situation, I contacted my landlord and asked him about the possibility of reporting for his tenants and he was very open to looking into how it might be easily done. Good landlords want to offer tenants a great place to live as well as special offerings and amenities. He could easily see that such a benefit as having timely rent payments reported for his tenants could make his properties more attractive to renters – particularly those that are just starting out and may wish to make a major purchase (maybe a first home) in the future. My landlord already offers rent payments online – reporting may be an easy leap from there.
So, if you are a renter and you would like to build or maintain a good credit file, find out if your property manager or landlord is already reporting – or is willing to explore reporting your timely rent payments. On the other hand, if you are the type of tenant that is a little lax in paying your rent on time, for now you are safe. Only timely payments are currently being reported, with the exception of a derogatory action such as an eviction. But it may only be a matter of time before rent payments become normal in credit reporting. As more individuals and families decide against home ownership, or like me have opted for a lifestyle change, the demand from tenants will grow as consumers become more educated about their credit scores. Treating responsible renters with the same respect as responsible homeowners is long overdue.
Pamela Sandy, CFP®
CONFIANCE, LLC, Financial & Investment Advisors