Experian starts using rental payment data to figure credit scores

paying rent on time

Experian is the first major credit reporting agency to include rental payment data as a factor in a credit score. Image: CC TheTruthAbout/Flickr

If you’re looking for ways to boost your credit score, add paying your rent on time to the list. Experian, one of the major credit bureaus in the U.S., has started to factor in timely rent payment data in credit reports. Experian is the first credit bureau to use data about paying rent on time, instead of paying rent late, to affect credit scores.

Experian pioneers positive rental data

Until Experian started using positive data, only negative rental data would show up on credit reports. Such negative data often results from a landlord sending an renter’s account to collection. Now Experian is tracing rental information through its RentBureau division. RentBureau is a specialty credit bureau that collects rental payment data from a property management network renting to more than 8 million households in the U.S. In a statement announcing the service, Experian said there are nearly 96 million renters who always pay their rent on time that are not getting the credit terms they deserve.

Both renters and landlords benefit

The news from Experian cuts both ways. Whereas before only getting sent to collection would result in negative rental data, simply getting behind on rent payments could become an Experian criterion starting in 2012. But industry experts agree that adding rental payment data to credit reports is by and large a positive development for consumers. It removes a key obstacle for building good credit from young people in particular who have not yet obtained credit cards, auto loans or mortgages. There’s an upside for landlords as well. Landlords in the RentBureau network can access its database to determine if applicants will be good renters.

With the other credit bureaus jump on board?

An emerging credit bureau called VantageScore, which ranks consumers on a scale from A to F, has been already using rent payments in its credit score model. Experian’s arrival could increase demand from lenders and underwriters to include rental data in credit scores. FICO has said that it will evaluate and compare Experian credit reports that factor in rental payment data. Over time, rental data in credit scores could be a boost to the mortgage lending industry by helping more people qualify for credit they deserve.

Sources

Huffington Post

The Baltimore Sun

Wallet Pop

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