There are several points to keep in mind if you are looking to improve your ability to qualify for a mortgage by adding your rent payment history to your credit report. First, rent payments usually do not automatically appear on your credit report so they do not help you establish your credit history or improve your credit score, unless you take additional steps.
It is very important to pay your rent on time, especially for the twelve months before you submit your mortgage application, but in most cases rent payments do not directly affect your credit score because your landlord or property manager does not report them to the credit bureaus.
There are a number of services, however, that you can sign up for to have your rent payment history added to your credit report. The purpose of rent payment reporting services is to help you build your credit history, and hopefully lift your score, but their impact is relatively uncertain.
We always caution against using services that promise to improve your credit score because so many other factors affect your score. These services may benefit some people while offering minimal help for others.
Rent payment reporting services tend to work best if you have a limited credit history. Adding your rental history to your credit report adds another account that demonstrates your creditworthiness and may increase your score.
The higher your credit score, the lower your mortgage rate and monthly payment. Additionally, certain mortgage programs require you to have a minimum score to qualify.
Review the Credit Score Required to Qualify for a Mortgage
If you already have an extensive credit history and your score is relatively low due to negative credit events, then adding your rent payments to your credit report may not provide a significant benefit. In this case, you may be better served by proactively addressing your other credit issues.
Rent payment reporting services typically require you to pay an upfront fee of $50 to $100 and an ongoing monthly fee of $10 to $15 to report your rent payments to the credit bureaus. That is money you could use to save for a down payment or to pay down debt so you need to make sure that the benefits justify the cost.
Additionally, before you select a rent reporting service we recommend that you contact them to learn more about their offerings as well as the requirements for both tenants and landlords. These services require the participation of your landlord and there is no guarantee that they agree to participate.
For example, if your landlord is an individual investment property owner as opposed to a large real estate investment company he or she may be less inclined to go through the process of reporting your rent. If your landlord does not report your payments, then the rent payment reporting company cannot provide the information to the credit bureaus and your rent payment history is not included on your credit report.
The table below outlines mortgage rates and fees for leading lenders near you. We recommend that you contact multiple lenders to understand the rent payment history required to qualify for a mortgage and to find the best terms.
The second point that you should be aware of is that most lenders require you to verify your rent payment history for the year before you apply for a mortgage and you do not need to use a rent reporting service to meet this requirement. Additionally, the majority of applicants are approved for a mortgage without their rent payment history appearing on their credit report.
If you pay your rent by check or automatic withdrawal, you can use cancelled checks or your bank statements to verify your payment history. In some cases lenders may also request a letter from your landlord to confirm that you made your rent payments on time, although this is relatively uncommon.
In closing, including your rent payments on your credit report may improve your credit score and help you get approved for a mortgage but it is usually not necessary. If you already have a high enough score and you can verify your rent payment history through others ways then you should be able to qualify for a mortgage without using a service.
Use our Mortgage Pre-Approval form to get approved for your loan. Getting pre-approved enables you to resolve potential issues and shop for homes with greater certainty.
"B3-6-05, Monthly Debt Obligations, Rental Housing Payment." Selling Guide: Fannie Mae Single Family. Fannie Mae, February 5 2020. Web.