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Experian To Include Rental Payments In Credit Score Calculations

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Historically, the nation’s apartment dwellers haven’t gotten any financial credit for paying their rent on time, month after month, year after year.

According to the National Multi Housing Council, there are about 95 million renters in the U.S., comprising about 33% of all households.

Now, many of those renters writing checks to landlords are going to catch a break. For the first time ever, one of the giant credit reporting firms  – Experian – will include rental payments in their credit scoring formulas. That could boost the scores of millions of Americans who pay on time, and help them get better deals on car loans, credit cards, and other forms of credit.

Historically, credit reporting firms only included mortgage payments in their credit score calculations.

“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,” says Brannan Johnston, vice president and managing director, Experian RentBureau.

But before you get too excited, note that Experian can only collect rental data from the 45 property management companies it canvasses across America.  That canvassing covers about 8 million of the 95 million renters across the country.

Experian doesn’t provide a list of participating properties. So if you want to know if your credit will be impacted, you’ll have to ask your management company.

Lenders may benefit, too. Experian adds that creditors will automatically see a borrower’s rental history on an Experian credit report. This will give lenders one more key payment factor to consider when deciding whether or not to offer credit to consumers.

There is a downside. While Experian will begin including positive rental payment information in 2011, the company will also include any negative rental payment data starting in 2012. So if you haven’t kept up on your rent, your credit score will reflect that piece of bad news, too.

But for renters looking to either build or improve their credit scores, the Experian announcement is good news. After years of making those on-time payments to your landlord, it will finally begin showing up in your credit report.

And that’s a point not lost on Experian. “There’s a growing number of people who are graduating from college and are trying to get a cell phone, rent a car, or get a credit card and are unable to, because all they’ve done is establish a history of paying rent on time,” said Johntson.

Now rental payments will help millions of Americans earn higher credit scores.

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