08/15/2011
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Are you among the 50 million people who have little or no credit history?
Do you meet regular payment obligations like paying rent and utilities but still have a "thin" credit file because these nontraditional sources do not show up on your credit reports?
There is good news on the horizon for renters because one of the major consumer credit reporting agencies (Experian) recently announced that it now adds rental data to credit reports which will affect the credit histories of millions of consumers.
Now don't get too excited because not every renter will benefit because Experian is drawing its rental payment data from only 45 property management companies in the country which covers about 8 million residents.
As a result the creditworthiness of these millions of residents will be much more favorable in the eyes of lenders. Many rental payments are equal to if not greater than some mortgage payments so having this information listed on your personal credit file is a giant leap for those who rent.
The important thing to take away from this is Experian is recognizing that rental payments are an important role in determining your creditworthiness. Brannan Johnston of Experian said "Given that one third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent."
But what if you're property management company is not one of the selected few?
How can you build up your credit report with your rental payments? Until rental payment data becomes a standard trade line with the three major consumer credit reporting agencies another option would be getting your rental payments reported to PRBC.
PRBC is a credit reporting agency that reports on "nontraditional" payment data like rental payments and utilities in order to show lenders that you pay your bills on time.
Many renters who look to qualify for a mortgage are asked to provide a verification of rent or VOR and in some cases this can be difficult when dealing with private landlords as opposed to property management companies. This is where credit agencies like PRBC can be a great tool in allowing renters to report their rental payment history in a credit report. Many lenders like Fannie Mae will use alternative credit agencies like PRBC as an additional source for gathering credit information on a loan applicant.
There are two options you have to accomplish this:
Your property management company must subscribe to PRBC and furnish your rental payment data to its database. You can utilize an Account Now Prepaid Master Card and pay your bills using its Account Now Bill Pay. Each bill payment you make is reported to PRBC which results in building up your PRBC credit report. Now that you know how your rent can build up your credit reports why not add your utilities, cable, and insurance payments too!
This can be especially beneficial in qualifying for a home loan because you can demonstrate that you've made consecutive on-time bill payments that include a housing payment (rent), and other bills such as electric, cable and phone.
Let's hope that Equifax and Transunion will follow Experian's approach and expand this underserved population of new creditworthy customers.
Marco Carbajo is a Business Credit Specialist with over 18 years experience in the business and consumer credit industry. As an entrepreneur he has successfully built two multi-million dollar companies in a few short years. Marco Carbajo is founder of the Business Credit Insiders Circle, a step-by-step business credit building system. Follow Marco on Twitter @MarcoCarbajo and read more of his insights on how to build up your credit with rent payments. Also, visit http://www.businesscreditblogger.com/.
© 2011 Marco CarbajoThe views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal, financial, or medical professional.