Credit Bureau Will Begin Tracking Rental Payment History

Amid the lingering national housing crisis, many renters may have felt that they had gotten away relatively unscathed in these tough economic times, avoiding underwater housing prices, high interest mortgage fluctuations, and the fear of foreclosure from lenders eager to toss unwary debtors from their humble (or not so humble) homes.

But in 2011, many renters should be aware of a new worry of their very own in the coming year: tenants who get behind on their housing payments will begin negatively impacting their own credit rating. That’s right. According to Lynnette Khalfani-Cox of WalletPop, Experian, one of a trio of primary credit bureaus, has recently started collecting consumer rental payment information for the purposes of including that very data in its credit reports. “For 2011, Experian is only reporting positive rental payment information about consumers. But starting in 2012, Experian will also keep tabs on and report negative information too, such as late rent payments. ‘Given that one-third of the U.S. population rents, we felt it was imperative to reflect the true creditworthiness of those individuals who responsibly pay their rent,’ Brannan Johnston, vice president and managing director, Experian RentBureau, said in a statement.”

The upside?

If you’re a renter and you pay your landlord in a timely way, there’s very little to worry about. In fact, Khalfani-Cox found that the notice of timely rental payments on a credit report could yield great benefits for ordinary Americans (from recent college graduates and immigrants to women and widows) seeking loans or other forms of credit but without traditional forms of credit history such as using plastic or home ownership—both of which can be risky in an insecure economic environment. “Some industry experts say the inclusion of rental payment data in credit files is actually an enormously positive development for consumers -- because it will help banks and other lenders see which consumers are actually quite credit-worthy, even if those individuals don't yet have traditional forms of credit, like credit cards or mortgages…. According to the National Multi-Housing Council, there are 96 million renters in the U.S. who aren't getting the credit they deserve because their rental payment data hasn't been accounted for. RentBureau tracks the payment histories of about 8 million renters.”

And landlords, apartment owners and property managers will be anxious to provide this information about your rent history to Experian’s RentBureau. In return, they’ll be able to tap into RentBureau's database to check and see which new rental applicants are best for them.

The downside?

Obviously, if you’re a renter and you fall on hard times in the next couple of years, having dings on your credit report due to rent in arrears won’t be a good thing. What’s worse is that not only will your credit be damaged, but also potential landlords can now see which applicants are good credit risks and which aren't. They can thereby “reduce their risk of approving tenants who might skip out on the rent, write bad checks, damage property, or ultimately get evicted” by kicking you out of consideration before you’ve even signed a rental agreement.

Plus, where one credit bureau goes, others may follow. In the future, other reporting agencies will likely begin collecting on-time (or delinquent) rental records.

The moral: times will get better for those on a good financial track and worse for those who’ve gone off the fiscal rails. Get your economic house in order while you can.

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