Kristy's Blog

Q.
I recently applied for a mortgage and was denied because my credit score was under 600. I was surprised to hear this because I have no debt beyond my car payment which has never been late in the 4+ years that I have been making car payments. I got rid of all my credit cards and paid them off 8 or 9 years ago. The mortgage company said that THAT was the problem. I don’t have ENOUGH established credit and they suggested that I get 3 or 4 cards. Not an easy thing to do when your credit score is so low. Talk about a “Catch-22”!

The decision to eliminate my credit card debt has come back to bite me in the butt. The only other payment that I make every month is my rent. I have a good, strong solid rental history of 6 years with my current landlord and I can also throw in the 2 landlords before this one. Unfortunately, my rental payments don’t get reported to the credit bureaus, so it does nothing to benefit my credit. I have found several web sites that, for a montly fee, claim to report rent payments to Experian and Trans Union, and that this has the POTENTIAL of raising my credit score substantially.

As a tenant, I have to sign up and then my landlord can go back up to 2 years and verify my on-time rentaI payments. I rent from an individual and this is the only rental property that he has. The 3 that I have looked at are RentalKharma.com, RentBureau.com and RentReporters.com. I’m a little hesitant to sign up for any of these for fear that it is just going to cost me money and not benefit my credit score. I don’t know if this matters or not, but I live in Michigan. Perhaps an answer to my question will benefit renters all over the country.

A.
Your landlord or rental management company may be able to help you by using rent-reporting companies like this, and it will be your job to convince them to do so, but there are some things to consider. The companies themselves need to be reputable, cost effective, and their service needs to work.

Reporting rental history is hardly an established way of building credit yet. VantageScore and FICO are on board, but the problem lies in getting the rental payment history from your landlord to the credit bureaus, which is no small task. Experian is working overtime to make this commonplace (starting in 2010 with the purchase of RentBureau), and TransUnion is definitely opening the door for large rental property management companies with ResidentCredit, but both of these credit bureaus just started incorporating rental history last year. And, Equifax appears to be playing catch up.

One thing is for certain, nobody is talking about how much this type of trade line may, or may not, raise your credit score. From what I can tell, the less credit you have (college student, no score, etc.), the more you may benefit from this type of reporting. For the average joe who already has a score, the rise in points may only be marginal. We’re still in the early stages of rent reporting, but RentTrack did a 6-month review of the impact last year that found the overall affect to be positive.

Getting back to the aforementioned rent-reporting companies. I did some research and here’s what I’ve learned:

RentalKharma

This company has a B+ rating with the BBB, which isn’t too bad, with mostly resolved complaints, but I would definitely give it a look to learn where the issues have been, so you know what to be on the lookout for. They charge an upfront $40 fee, then $9.95 per month thereafter, but it was buried in the site – I had to dig into the FAQ to find it! I prefer a company to be forthcoming and transparent in their cost and business practices.

I do like their 100% satisfaction guarantee that states a full refund if your rental payments don’t get verified by your landlord or rental management company, however, I couldn’t help but notice there was nothing about guaranteeing that rental payment showing up on your credit report. If you refer back to the BBB, I think you’ll find this has been an issue in the past. The other thing that bothers me is the fact that they only report your rent to TransUnion.

Upon searching this company, it was hard to ignore the complaints on them around the internet. Please be vigilant in your research before hiring RentalKharma.

RentBureau

These guys are owned by Experian, so everything will be somewhat streamlined. If you’re renting from a property management company, ask them whether they already report to RentBureau. If not, Experian recommends you and your landlord opt-in using the following rent payment services (all with stellar BBB ratings), which are different from rent reporting companies:

• ClearNow – Reports rent payments to RentBureau (Experian) once landlord and tenant are both enrolled (landlord pays $14.95/month for one debit; tenants are auto-debited for rent payment).
• RentTrack – Appears to be for landlords with 20 or more properties. Reports to Experian and TransUnion. Price is not listed on their website.
• PayYourRent – In your case, having a landlord, he/she would need to pay $19.95/month for ACH (there’s a cc option too).

Once your landlord or property management co. signs up with one of these rent payment services, they are usually charged monthly for the convenience of accepting tenants’ rent payments online via ACH or credit card, plus transaction fees. Tenants are also expected to sign up or opt-in to pay rent using their service.

For tenants, like you, who are interested in this strictly for the credit reporting benefits, you can offer to cover that extra cost for your landlord in your rent payment. You know, bargaining can be a powerful tool.

RentReporters

Although RentReporters has an A rating with the BBB, I can’t say the same for their website. It was over-simplified, and I found the lack of information very frustrating. As a result, I can’t say much because I, honestly, am not sure how it works or what the true cost is for both renter and landlord. If you have used, or have any first-hand experience with this company, please share in the comments below.

This article by Consumer Recovery network first appeared here and was distributed by the Personal Finance Syndication Network.