Company Claims to Report your Rent Payments and Improve your Credit Score

Rent reporters market their service as a way to make your rental payment count. Credit scoring does not give consumers any positive credit scoring points for paying rent on time. This company says that they can change that. All you have to do is sign up for their service, and they will make sure that your timely rent payments are reported to the credit reporting agencies.

Let’s start off with the marketing –

1) Good or bad credit – this company will enhance your credit profile
2) Your rent will be reported directly to the major credit bureaus
3) Prove to banks and creditors that you deserve all types of loans
4) Your credit profile improves with every rent payment

Now when you go to the fine print, you start to see the “disconnect” between the marketing and the fine print or reality.

- The marketing says that it should take no longer than 60 days to show up. The fine print says that it could take as much as 160 days.
- The marketing says it will be reported to the credit reporting agencies and that it can benefit your credit score. The fine print says that the information might show up on one or many of the major bureau reports. There is a big difference between reporting and whether or not they can guarantee it will show up.
- In their marketing, they intermix the terms “improve your credit file” and “improve your credit score.” They lean more to the use of the phrase “improve your credit files.” Although anyone can add information to a credit file that is deemed positive, if it does not improve your credit score, it is for the most part worthless. Even deeper in their fine print appears “profile improvement does not guarantee a higher credit score.”
- You cancel at any time. Of course, if it is not within 5 days you will lose the $89.95 fee. In other words, you are paying this service a fee that is basically non-refundable to add information to your credit file that may or may not make it to your credit file.

So, what do the credit reporting agencies have to say?

Fair Isaac, who developed the credit scoring model, said this about rental payments in general. They “stated that it couldn't find a reliable enough database of rental payments and, more importantly, there are questions about how ‘predictive’ rent payments are. In other words, your ability to handle a checking account and pay off a TV at a rent-to-own outfit might say more about your creditworthiness than whether you've managed to get the landlord a check each month.”

I also ran this by a senior executive at one of the credit reporting agencies – his reply:

“Bob,

I would agree with it in theory, but I'm not aware of many rental companies reporting payment histories to credit bureaus. Perhaps this company does, but not to us. The issue of "alternative payment types" is one which has been discussed in financial circles. There are a couple of companies I've heard of who are trying to build databases of alternative credit data, but I haven't seen them in action yet. I believe it will take time to develop this type of alternative data, which will serve those consumers who are left out of the traditional credit marketplace. I don't expect it to happen quickly, and if it does, the big issue will be if the "big three" reporting companies willhave this data, or will it only be available on a stand alone database. There's a long way to go on this subject before anything effective hits the marketplace.”

Finally, their marketing slogan -

We have helped thousands feel like paying rent is finally paying off!!

The marketing certainly does make you feel like it is a good thing. The reality is another story.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.