By John Ulzheimer
The Ulzheimer Group
For decades your credit reports have contained a record of how well you paid your credit obligations. More specifically, this primarily meant your credit cards and loans. What had been missing from credit reports for well over 100 years was any record of how well you paid rental obligations for apartments or homes, and almost all of your utility bills. Slowly but surely, that is changing.
Over the past several years a number of options have popped up to assist consumers who rent rather than own to benefit from making their rental payments on time. Of course, in order for your credit to benefit from proper rental management a record of such payments has to make its way to your consumer credit reports as maintained by Equifax, Experian and TransUnion.
Traditionally it was up to your creditors to provide information about your liabilities to the credit reporting companies. This process is formally referred to as “data furnishing” and companies like banks and credit card issuers are referred to as the “data furnishers.” In the past, in order for your rent or any other non-traditional credit activity, like utilities, to end up on your credit reports a landlord, a property management company, or a utility service provider had to furnish it, and almost none of them did so.
And because your rent and other unreported liabilities were never furnished to the credit reporting companies, your credit scores could not benefit. It was the credit equivalent of the tree falling in the woods. Nobody heard it.
More Consumer Control Evolves
There is a trend evolving which gives consumers some control over the credit reporting of non-traditional credit accounts. For example, Experian Boost is available to help you add your utility and mobile phone accounts to your Experian credit report. This is an example of what’s being called consumer controlled or permissioned data. You choose and control whether or not it’s added, and for how long it’s reported.
Several years ago Experian acquired a company called RentBureau. RentBureau was essentially a credit reporting database but for landlords and property management companies. After the acquisition Experian added millions of rental records to their credit file database, which now appear on consumer credit reports.
And finally, there are third-party intermediary companies like RentalKarma and RentReporters which, for a fee, purport to report your rental history to one or more of the national credit reporting companies. By doing so, this might improve your credit scores and help to build or rebuild your credit reports.
Impact on Credit Scores
Credit scoring systems, like the VantageScore credit score, have to be designed and developed to see and consider non-traditional credit information, like rent and utilities. Unfortunately, older generations of commonly used credit scores do not consider rental information. So, in practical terms, the information is neither helping nor hurting your credit scores if they’re being calculated by some older scoring models. All VantageScore models do consider rental and utility accounts if that information resides in your three credit files.
I personally tried Experian Boost. I added my power and gas utilities to my Experian credit report. My score went up 5 points. It cost me a grand total of zero dollars. I’ll take it!
Should I Add Rent or Utilities?
The benefit of adding non-traditional scorable information to credit reports isn’t for everyone. If you’re sporting a VantageScore of 820, you don’t need to add your power bill to your credit report. Your scores are fine and you’re likely getting the best deals lenders have to offer.
If, however, your scores are at or below the national average, a number that varies between 675 and 700-ish, then adding something positive to your credit reports could be the difference between an approval or a denial. Or, at the very least, the score improvement could mean a better interest rate or a higher credit limit.
The best news about these consumer controlled options that you can choose to participate, or you can choose to not participate. Moreover, none of the available options are permanent. For example, if you try Experian Boost and your score doesn’t go up at all, then you can shut it down. If adding rent to your credit reports didn’t help your scores enough, then you can cancel your subscription.
Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of VantageScore Solutions, LLC.