hi-riseIf you’re just starting out with credit, working your way towards a higher credit score can be challenging. Getting a credit card is one option but you run the risk of ending up in debt if you’re not able to pay off what you charge in full each month. Fortunately, there’s another way adults can build credit: paying their rent.

Rent reporting is a relatively new way to establish or improve your credit score but it can be effective if you know what you’re doing. Keep reading to learn how to use your rent payments as a stepping stone to a better credit rating.

1. Sign up with a rent reporting service
To build credit with rent payments, you first have to sign up with a rent reporting service. These companies collect information about your rent payments and then report that to the three major credit reporting bureaus–Equifax, Experian and TransUnion–on your behalf. Some rent reporting companies report to just one bureau while others pass on your information onto all three.

RentalKharma, for example, reports to TransUnion. You can add up to 24 months of payment history to your credit report, which is great if you’ve been renting for awhile and paying on time consistently.

Tip: Look for companies that offer rent reporting to the credit bureaus you’re hoping to target. While you’re at it, see if a particular company offers any extras. RentTrack, for example, offers members a credit dashboard so you can see how different financial habits affect your credit rating.

2. Verify your renter status
Once you’ve signed up with a rent reporting service, the next step is to verify your account. This means the rent reporting service connects with your landlord to make sure that the information you’ve provided is correct.

Some rent reporting services don’t charge a fee verification while others do. RentalKharma members, for example, pay a one-time $40 verification fee at the outset to set up their account and verify their information.

Besides that, you also need to be aware of any monthly fees the rent reporting service charges. Rental Kharma’s fee comes to $9.95 per month. Some services charge more, others charge less. You may also pay a separate fee to process rent payments through the service if that option is available. You’ll have to weigh the expense against any payoff you expect to get from having your credit score increase.

3. Pay your rent on time
The most effective way to build a better credit score is to pay your rent, and all of your bills for that matter, on time. As a general rule, on-time payments can improve your credit while late payments can be extremely damaging. If you need a little help remembering when your rent payments are due, set up payment alerts through your online banking system or another personal finance app.

Tip: If you’ve paid your rent late anytime in the past 24 months, rent reporting may not do you much good if those late payments show up on your credit report.

4. Check your credit report and score regularly
Once you sign up with a rent reporting service, you’ll want to check your credit regularly to make sure your payments are showing up. You can get one credit report free each year from each of the three major credit bureaus but if you want to see your credit on a more regular basis, you could also sign up for a free credit reporting service.

As far as checking your credit score goes, you could pay for a traditional FICO score but it’s possible to get it for free. Discover, for example, offers free FICO scores to everyone, regardless of whether you have a Discover credit card or not. A number of other credit card issuers offer their cardmembers free access to their FICO scores or alternately, their VantageScores.

Besides allowing you to track the progress you’re making in raising your score, checking your credit report regularly can also help you pinpoint trouble spots that are keeping you from taking your credit to the next level. Take our quick two-minute assessment to learn more about how your credit affects your financial life.

A word of caution
One of the most important things to remember about building credit from renting is that results aren’t guaranteed. While one person may see their score take a huge leap, someone else might realize a much smaller boost.

For example, I spent some time reading customer testimonials and reviews for RentalKharma. Users were reporting bumps of 20 to nearly 80 points in their credit scores. By comparison, a 2015 study from RentTrack, another rent reporting service, found that users saw an average increase of nine to 29 points in their score.

Based on that, it stands to reason that you’ll see some kind of impact on your credit score by using one of these services but there’s no way hard and fast rule for determining how much it will improve.

Another thing to keep in mind is that you have more than one credit score and rent reporting doesn’t always factor into all of them. While FICO 9 and FICO XD incorporate rental data, those scoring models are newer and aren’t as widely used as older generations of FICO. Instead, your rent reporting data may be included in your VantageScore.

These scores are based on some of the same factors as a FICO score, such as payment history and credit utilization, but the calculation is different. Thirty-four out of the 50 largest U.S. financial institutions use the VantageScore model in lending decisions. That’s good news if you plan to apply for a loan at some point. Just remember that any increase in your VantageScore resulting from timely rent payments may not carry over to your FICO score.

Tell us your renting stories below! How have you improved your credit through renting?

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