How Renting Can Impact Your Credit

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According to the U.S. Census Bureau, about 36% of U.S. households are occupied by renters. If you’re one of the many renters, you may be wondering: Does renting an apartment build credit? After all, a healthy credit history can be important to help you reach certain financial goals.

The good news is that you may be able to improve your credit as a renter. Here are some ways renting can help you build a credit history and other tips to keep in mind:

Does renting an apartment build credit?

Renting can help you build credit if your landlord is reporting your rent payments to the credit reporting agencies. Tools like TransUnion’s ResidentCredit make it easy for landlords to report rental payment information. Since on-time payments are one of the most important credit score factors, if your landlord is reporting your monthly payments, consistently paying your rent can reflect positively in your credit report. This can be especially valuable if you have no or limited credit history.

To see if your rent is being reported by your landlord, you can check your credit reports. You can get free weekly credit reports. If your account is in good standing, you would see your rent payments in the Satisfactory Accounts section in your TransUnion credit report.

You can also ask your landlord directly if they’re reporting rent payments. Recent TransUnion tenant and employment screening research found that 27% of property managers report rent payments to credit reporting agencies. If your landlord is not reporting, you can ask them to. Doing so could benefit both of you.

Considerations around payments

Consistently making on-time payments can help you build a healthy credit history, but missed payments can have a negative impact. If your rent is reported and you miss payments, they may be considered delinquent. They could then appear in the Adverse Accounts section of your TransUnion credit report.

In this way, rent payments are similar to many other credit accounts. Talk to your landlord immediately if you think you’ll have trouble making upcoming payments. If your rent becomes delinquent for multiple months and you’re at risk of eviction, those missed payments could be sent to collections. This could have a significant, negative impact on your credit health.

What to expect with a renter credit check

If you’re on the hunt for a new apartment, a rental application may include a credit check. This can result in an inquiry on your credit report, which may cause a temporary dip in your score. Not all applications will result in a hard inquiry. As with every step in the application process, ask the landlord or property manager if you have any questions.

If you’re considering multiple properties, it may help to “bunch” your applications together. Some scoring models count multiple hard inquiries for a single type of application as one inquiry, as long as they’re made within a short time span. This can limit the negative impact to your credit.

To better prepare for your applications, it’s important to know where your credit stands. You should check your credit reports on your own before you begin your search. If you find something you believe to be inaccurate on your TransUnion credit report, you can dispute the item for free easily online. Knowing your credit reports are an accurate representation of your credit history can help you feel confident during the application process.

Additional impacts on credit

Renting can indirectly affect your credit as well, especially if you’re in the process of moving. Your application will likely include an application fee and security deposit, and you may have to hire movers or purchase new furniture. Those costs can add up.

If you’re using credit to pay for these expenses, be mindful of growing balances impacting your credit utilization rate. Credit utilization rate measures how much of your available credit limit you’re using, and it’s another important credit score factor. Popular advice is to shoot for a credit utilization rate of 30% or under, but the lower the better.

Credit and renting: Consider all the impacts

There are both direct and indirect ways renting can affect your credit. Monitoring your credit, knowing credit score factors and practicing healthy credit habits will make you better prepared as a renter and help you achieve your credit goals. If you’d like help understanding your TransUnion credit report, we’ve created a credit report guide that breaks down each section and provides tips to help you along your credit journey. 

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

The credit scores provided are based on the VantageScore® 3.0 model. Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.

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