Homebuyers benefit as rent payments are added to credit reports
All major credit bureaus and mortgage buyer Fannie Mae recently announced they would allow rent payments to be considered for credit and loans.
INDIANAPOLIS — First-time home buyers are out of luck.
“It’s been extremely difficult,” said Carly Zabkar. “The houses that we are attracted to and then want to make an offer, they disappear in days and minutes.”
Zabkar has learned the hard way that it’s not easy.
“It’s really hard to compete,” she said. “I thought I’d already be in a house. I’ve been a tenant. I’m turning 30, and it’s not as easy as I thought.”
The number of millennials expecting to rent forever has doubled in recent years, to more than 18%, according to Apartment List’s Millennial Homeownership Report.
“They feel like there are a lot of cards against them,” said Credit Sesame’s Sazia Virji.
Virji says one factor that works against many first-time home buyers is credit rating.
Two-thirds of millennials are “credit invisible,” meaning they have no credit score or very low credit score. They are still burdened with student debt.
The three major credit bureaus and mortgage buyer Fannie Mae recently announced that they would allow rent payments to be considered for credit and loans.
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“It’s the biggest obligation people have, and so it should be included,” Virji said.
People can’t do it on their own yet, but rent reporting services like Credit Sesame can help you get your rent payments on the books, including those for the past two years.
Most charge a fee — $50 to $100, on average — but some are free.
“It’s about establishing that they’re able to make payments on time. That’s what mortgage is, so why not be able to do that with rent,” Zabkar said.
A potential head start for those who just want a place to call home.
“You just have to keep fighting and keep trying and keep looking and hanging on,” Zabkar said. “You can get so much return and just accumulate so much equity in your name to buy, so I think it’s worth the risk if you can accumulate enough credit.”
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According to Virji, for someone with a credit score of 550 or less, the average increase after taking rent into account is over 50 points. She said that’s huge for a lot of people because credit isn’t just a generational issue, it’s also a socio-economic one.
“We’re giving people more access to get into the financial system,” she said. “It really serves a lot of these underserved populations and segments of the population.”
Here are some companies that offer credit reporting services:
- Hire reporters: There is a one-time registration fee of $94.95, which includes up to two years of reported lease payments. From there, you can sign up for a monthly plan ($9.95 per month) or the annual plan ($7.95 per month). It reports to TransUnion and Equifax.
- Karma Rental: Initial setup is $50, including six months of past history, and service is $8.95 per month. It reports to TransUnion.
- LevelCredit: Previously known as RentTrack, LevelCredit charges a monthly fee of $6.95 to have your rent and utility payments reported to Equifax and TransUnion. A retrospective of up to 24 months is available on your current lease for a one-time fee of $49.95.
- eRentPayment: Free for users. Owners are charged $3 per transaction or $10 for up to five transactions per month. Reports to Equifax and Experian.
- Payyourrental: Collects rents and reports payments to the three offices. Free for renters, usually set up by landlords.
- Move the score: There is a $48 sign-up fee and the ongoing service costs $6.95 per month. There is a $65 fee for reporting up to two years of rental history. It reports to TransUnion and, if the owner is a property manager, to Equifax.
- Rental Esusu: Reports your lease payments to the three major credit bureaus. You can register as an independent renter for an annual fee of $50 on the Esusu Rent mobile app. (It also has a version offered by the owners.)
- MoCaFi: Free for debit card or MoCaFi app users, $3 per report for online users after first report. Relief from Equifax and Transunion.
- CreditMyRent: This service charges a monthly fee of $14.95 with no setup fees. Additional charges apply if you wish to have past rents reported. It reports to TransUnion and Equifax.
- Payment report: A $49 registration fee allows you to report two years of rental history to Equifax and TransUnion. Continuous reporting is free, and you can add an additional roommate or spouse for free. (There is also a version offered by landlords that requires electronic rent payments.)
- Pinata: Free for tenants. It reports to at least one major credit bureau, regardless of your ownership. If your landlord signs a specific partnership with Piñata, your rent payments can be reported to all three offices.