Can rent payments influence your credit score? An explainer

Rent payments do not typically influence your credit score unless they are reported to the credit bureaus such as CIBIL, Equifax or Experian. 

Conventionally, rent payments are not included in your credit report by default, just as for credit cards, loans, or mortgages. 

For example, if Ajay Verma skips his credit card bill, but ensures to pay his rent on time, his credit score will not automatically improve on account of these regular payments. 

But it can be done if he so wishes. There are a few ways to have the rent payments reported to CIBIL, which can then positively affect your credit score so long as you are regular in making these payments. 

How can you report your rent payments?

There are a number of services which allow tenants to get their rent payments reported to major credit bureaus such as CIBIL, Experian and Equifax. 

For their services, these agencies typically charge a small fee and may even require the cooperation of your landlord for having these payments reported. And once they are reported, timely payments of rent can show responsible financial behaviour and improve your credit score.

ALSO READ: Have poor credit score? Here are 7 simple steps to improve it

It’s vital to note that not all credit scoring models may incorporate rent payments, and the impact on your score can vary based on which scoring model was used. 

Conversely, if you happen to miss your rent payments or make late payments, this could potentially harm your credit score if reported.

So, it is recommended to check with the credit reporting agencies or the service providers directly to understand how rent reporting could impact your credit score in your particular case.

Frequently Asked Questions:

Can you get your rent payments reported to CIBIL?

Yes, it can be done but it does not happen by default. So, it needs to be specifically done in order to improve the credit score so long as you are paying rent on time.  

What is the key disadvantage of a low credit score?

Among several disadvantages, one of the key disadvantages is that you are likely to be offered higher interest rates even when a loan is approved.

Do banks take a decision of giving a loan on the basis of borrower’s credit score?

Yes, lenders generally use credit score as a key factor in determining whether to approve a loan application. A low credit score may result in denial of credit or approval with less favourable terms.

Can the credit score determine a borrower’s chances of renting a flat?

It could be hard to find a flat in big residential complex which sticks to the pre-defined criteria of shortlisting tenants on the basis of their credit score. Small landlords and housing complex, however, don’t have bother to check the CIBIL score.

What is the impact of low credit utilisation ratio?

A low credit utilisation ratio shows responsible credit management and may impact your credit score positively. It’s recommended to keep the credit utilisation ratio below 30 per cent.