Does Paying Rent Affect Credit?

Paying rent can affect your credit rating if your landlord reports the payments. Commercial rental agencies typically file monthly reports to at least one credit reporting agency TransUnion, Experian or Equifax. Independent property owners may not report the rental payments to a consumer credit reporting agency. If the payments are not reported, they will not affect your credit.

What is a Credit Rating?

A consumer credit rating, also known as a credit score and a FICO score, is a numerical representation of financial health at a certain point in time. Credit reporting agencies compile payment information, outstanding debt and available credit information for consumers based on the monthly reports of lenders and other creditors. Signing a lease agreement obligates the renter to fulfill the terms of the agreement by making timely monthly payments to the landlord who is, in effect, a creditor. If the landlord reports the payments, timely payments positively affect a credit rating and delinquent payments negatively affect credit.

Credit Rating Calculations

Payment history, including reported rental payments, affects 35 percent of a consumers overall credit rating. The payment history category is the single most important element of the calculation. Credit rating calculations also include a consumers ratio of credit to debt, which is 30 percent of the score. The mix of different credit account types weighs in at 10 percent, credit history is 15 percent and length of credit accounts equals 10 percent of the calculation. Other factors that affect credit are judgments, bankruptcies and foreclosures.

Delinquent Rent Payments

Rental agreements typically spell out the time frame after which a rent payment is considered delinquent. Unlike other credit agreements where payments are not considered delinquent unless they are past due for more than 30 days, a lease may only allow a renter up to 15 days before the payment is classified as delinquent. The time between the due date and the delinquent date is often called a grace period. Paying rent after the specified grace period will negatively affect a credit rating, if the landlord reports the payment.

Credit Reporting Laws

Credit reporting agencies have a responsibility to list accurate account information on a consumers credit report. If an agency reports a rent payment as delinquent, but the payment was actually made on time, the consumer has the right to file a dispute to have the negative information corrected. Each credit reporting agency maintains a website where consumers can file disputes according to The Fair Credit Reporting Act.