Credit score

How to make your rent payments show up on your credit score

Rent is the biggest monthly expense for most Americans, and there are ways renters can use one-time payments to improve their credit rating. But they can’t do it alone.

“It would be wonderful to see it eventually evolve into rent payments, automatically integrating them into credit reports,” said Sara Rathner, credit analyst at NerdWallet. “It’s something I’d like to see because I think a lot of people would benefit from it. But for now, you have to use a third-party service.”

These third-party services include special credit cards that tenants use to pay rent or apps that report rent payments to credit bureaus. But Rathner says many of these third-party services require a start-up fee or monthly subscription unless an owner agrees to cover the cost.

However, one company, Piñata, offers a one-of-a-kind program that’s free for renters. The company provides the service for free by working with companies that offer on-app rewards while renters build up credit.

“For us, it’s really about helping people who have lower to average credit scores; also thin credit records,” said Lily Liu, CEO and co-founder of Piñata.

Liu says Piñata isn’t a magic bullet for bad credit. It would take time for rent payments alone to recoup the big hits to bad credit.

“One of the big risks that we always want to remind tenants of is that the rent statement is only a small aspect of your total credit score,” Liu said. “It’s important to look at the other major expenses of life.”

Rathner says it’s also important to remember that anything can improve a credit score, just like anything can hurt a credit score.

“Obviously, if you ever have a late rent payment, it can hurt you. It’s kind of like paying any other late bill,” she said. “It may show up on your credit report, and it may temporarily affect your credit.”

Rathner also recommends that with any rent statement service, users first consider what will happen if they cancel due to moving or if a user has a dispute with a landlord. Piñata allows users to cancel at any time for any reason.