This post originally appeared on Sisters from AARP
Black folks often face a host of credit challenges stemming from lower incomes, discrimination, a lack of knowledge about credit scoring and more. But one additional factor — the low rate of Black homeownership in America — has also meant diminished credit scores.
Currently, nearly 6 out of 10 of us rent, with just 43 percent of African Americans owning their own residences, according to a 2022 report from the National Association of Realtors.
The result: People with mortgages get the benefit of having their housing payments reported to the credit bureaus. But for other individuals, what is often their largest monthly expense — their housing cost as renters — is typically excluded from their credit profile.
Thankfully, that’s changing in many ways, including the growth of numerous new services that let you get credit for making on-time rent payments.
Here are some simple ways to report your rental history and get the credit score you deserve.
Why don’t credit bureaus factor rent payments into your credit score?
Though over a third of the population rents, rental payments are still considered alternative credit data by the three major credit bureaus. As such, your history of handing over your rent check on time isn’t likely to be reported by your landlord.
But Equifax, Experian and TransUnion, the top three credit reporting agencies, will include your rental history in your credit report if they receive the information. So, you want them to have that information; you don’t want to fly under the radar of the major credit bureaus when you have a great track record of paying your rent on time.
Why are on-time rent payments a good way to build credit?
Rent payments can help build credit the same way paying your mortgage does. Though you’re not paying a debt per se, you can still establish a pattern of making regular, on-time payments, which demonstrates reliability to potential creditors. And since you have to pay for housing anywhere you live, you might as well get credit for your good habits!
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