Can Paying Rent Build Credit?

Rent is one of the largest expenses people pay each month, so reporting on-time rent payments can make sense if you’re looking to boost your credit score and build a credit history.

Millions of people have a hard time accessing credit cards, auto loans, mortgages — even rental homes — because they lack credit history. Having a good credit history can not only give you access to financial products, it can also broaden the selection of rentals available to you and get you lower interest rates on credit cards and loans, including a mortgage to buy a home if that’s in your plans.

“Credit scores play a significant role in housing, not just for homebuyers, but for renters,’’ says Zillow® senior economist Nicole Bachaud, who recently researched the issue. "Improving an individual's credit score can help remove some barriers to accessing housing.”

If you pay your rent on time, there’s an upside to having your payment history reported to the credit agencies. 

To that end, Zillow recently introduced a new feature that allows renters who pay their landlords monthly through Zillow to opt in to rent payment reporting. Doing so will result in on-time payments being reported to Experian, one of the three credit reporting agencies that track credit history and calculate credit scores.

Read on to learn more about credit scores, how online rent payments can affect your credit history, and how to use them to improve your financial picture.

What is a credit score?

A credit score is a prediction of how likely you are to make payments on time. However, this prediction is an inexact science, and it’s not a judgment on your value as a person or even your responsibility with money. The score is based on financial data about you collected and stored by three main credit reporting agencies: Experian, TransUnion and Equifax.

Credit scores are widely used by banks, mortgage providers, insurers and utilities to assess whether to lend you money or provide services that you pay for after the fact. Among other things, the scores can determine the interest you pay on a loan and the amount you’re allowed to borrow.

Many landlords also use credit scores — and the underlying credit data on which they’re based — to evaluate prospective tenants. Some landlords set a minimum credit score before they will even consider renting to you.

How are credit scores determined?

Financial information from your credit reports is put into mathematical models to produce scores that are supposed to predict how likely you are to pay your bills or repay your loan. The models differ, but they all take into account four main factors:

1. Your payment history
2. The amount of money you owe
3. How long you’ve been using credit
4. The types of outstanding credit you have (student loans, credit cards, etc.)

The most widely used scores are calculated by the Fair Isaac Corporation (FICO) and VantageScore. Here’s a breakdown of FICO’s scoring model:

Poor credit = score of less than 580

Fair credit = score of 580-669

Good credit = score of 670-739

Very good credit = score of 740-799

Exemplary credit = scores of 800+

The scores can change frequently as the information collected changes.

What credit score do I need to rent a home?

That depends on the landlord. Credit score requirements vary widely, and some landlords don’t even require prospective tenants to meet a target score. One corporate landlord in southern California maintains that “most companies” want applicants who have scores that are 620 or higher. 

Zillow research in 2023 found that renters who are prospective home buyers and know their credit score reported their scores ranged from 670-739. 

How do I get a good credit score?

The main ways to build and maintain a good credit score is by consistently paying your bills and loans on time, using less than 30% of the credit available to you, and making sure your credit reports are correct. Evictions, bankruptcies, foreclosures and delinquent loans or credit card balances can seriously hurt your credit score for years.

Many landlords run a credit check on prospective tenants. Those checks can be what are considered “soft” inquiries that won’t ding your credit score or “hard” inquiries that could. The companies that create the credit scores typically treat multiple rental inquiries in a single period as one soft check. 

Does paying rent affect my credit score?

Merely paying your rent won’t affect your credit score unless your rent payments are reported to the credit reporting agencies. A February 2022 survey of about 2,000 renters by the credit reporting agency TransUnion found that only 15% of renters have their payments reported.

If your payments are reported, and you pay on time and in full, those payments can help boost your score. If you don’t always pay on time, having those late payments reported on your credit history could hurt not only your credit score but make it more difficult to find a rental or buy a home.

Some rent reporting services, including Zillow’s, report only on-time payments, while others report all payments, including late ones. Choosing a service that only includes on-time payments can help you avoid getting dinged if you pay late.

Pros of rent reporting

If you’re interested in reporting your rent, here’s a list of pros and cons.

Helps you build a credit history

Your regular on-time rent payments will show up on your credit report, demonstrating to lenders and landlords that you’re financially responsible.

This is especially important if you’re among the millions of Americans who are either “credit invisible,” meaning you haven’t yet established a credit history, or “credit insecure,” meaning it’s difficult or impossible to obtain credit for even get a credit card.

You may even be able to get credit for past payments. It depends on the rent-reporting service, but some may charge you for adding it.

Boosts your credit score

How much of a boost depends on the mix of factors the credit agencies take into account when determining your score. The benefit could be especially helpful if you choose a reporting service that only reports on-time payments.  

People with thin or no credit history are most likely to see a boost. Those with thick credit files can benefit, but are less likely to see a substantial increase. People who don’t consistently pay their loans, credit cards and other reported bills as agreed aren’t likely to benefit since their total credit picture will be factored into the score.

Can establish a good foundation with your landlord

Landlords appreciate good tenants and may work harder to keep them happy. Rent reporting could give your landlord greater confidence in renting to you and lay the foundation for a good working relationship.

Leads to good financial habits 

Knowing there’s a tangible benefit to you by paying on time could help you prioritize budgeting and good financial habits.

Cons of rent reporting

Late payments can lower your score

If your late payments are reported to the credit reporting agencies, that late payment becomes part of your payment history. Since payment history carries the most weight when scores are calculated, your score is likely to go down. This won’t be an issue, however, if you use a rent reporting service, such as Zillow’s, that reports only on-time payments.

Could be difficult to manage in roommate situations 

While it’s possible to set up accounts where everyone pays their share of rent through the reporting service, some landlords prefer to get one payment from one tenant who collects the rent from any roommates. If roommates don’t pay on time, and the payment is late and reported, your credit score could take a hit.

May have a limited impact on credit approval

Some rent-reporting services send reports to all three credit reporting agencies, while others send the information to only one or two. The more limited the reporting, the less you may benefit since businesses use different credit reporting agencies to request credit reports when making decisions about extending credit.

Also, credit scoring businesses like FICO and VantageScore generate different types of scores for different uses, and may not always consider rent as a factor in calculating a particular score. Businesses and landlords can choose which score to use, and they may be using one that doesn’t count rent payments.

How to report rent to credit bureaus?

Talk with your landlord about whether they offer rent-reporting. Some services require landlords to agree to the arrangement while others allow renters to use them directly. 

Some services are free, some are paid for by the landlord and others by the tenant. Depending on the service, your payments will be reported to one or more of the credit reporting agencies.

There’s a chance your landlord may already use a rent-reporting service, in which case you want to find out whether using the service is optional or required. 

The number of services that collect and report rent online has grown in recent years. For instance, Zillow recently added rent reporting as an option for renters who pay rent online through Zillow. To take advantage of the reporting option, you would first invite your landlord to set up online payments through Zillow, which would then report your on-time payments to Experian.