While the number of people renting by choice continues to grow, there are still some downsides. Primary among them is not being able to build economic value by paying rent. For those that want to move on to an owned property and have the opportunity to build economic value, the process can often be difficult especially if they have bad or thin credit history.

But that problem is easily fixed through rent credit reporting, which consists of the monthly reporting of on-time rent payments to at least one of the three major credit bureaus. Unfortunately, only 20% of property owners report on time payments. This despite the fact that 92% of renters make on time payments and rent comprises the largest monthly expenditure for most renters.

The good news is this is an easy problem to solve, and it will lead to positive outcomes for both renters and property owners alike. All that needs to be done is for these on time rent payments to be reported to the three major credit bureaus.

With a vast majority of renters paying their rent on time, it makes sense for them to seek out properties that offer to report those on time payments to the credit bureaus. This is especially true when you take into account the fact that residents are renting longer than they have previously due to a number of factors, including increased interest rates and soaring housing costs. But when the time comes to move from a rental property to an owned property, a lack of credit history can be damaging both for the resident’s ability to get approved for a loan and the interest rate they’re offered if they do get approved. 

In addition, having a thin credit file or bad credit history can lead to an inability to get a good rate on a car loan or even get approved for a cell phone. For approximately ten years, credit bureaus have accepted reports on rent payments, but those have to come via a service that has been approved by the bureaus. Individual properties or individual residents couldn’t self report those payments to the credit bureaus.

Currently, only 15% of tenants have their rent payments reported to credit bureaus, that number doubles for Gen Z, who are taking a more active role in building their credit as 60% of residents under the age of 30 would like to have their rent reported to credit agencies. 

When residents opt to have their rent payments reported to credit bureaus, it puts them in control of their own credit. They're no longer subject to others determining what their credit is, especially when they are making on time payments. Some states have identified the demand and the need for credit reporting for these individuals and have passed legislation requiring properties to report payments to credit bureaus. Chief among them is California.

Another audience that can benefit from this service are students and first time renters. In just a year's time, they are able to build their credit rating if it was thin or non-existent or improve it if they have a bad credit history. In fact, 70% of renters who report rent payments noticed a significant improvement to their credit score.

Learn more

Learn more about the benefits of rent credit reporting by downloading our latest ebook, The economics of rent credit reporting, or by looking out for our next blog post that highlights the impact rent credit reporting has at the property level.