Personal Finance
Here’s how rent can make or break your credit, experts say
Blonde woman standing in the room while unpacking boxes.
Miniseries | E+ | Getty Images
Rent payments don’t typically affect your credit — but they can in a few circumstances. The consequences can be significant.
Rent doesn’t show up in your credit history, experts say because landlords don’t usually report payments to credit bureaus as credit card issuers and other lenders do.
When rent payments do appear, it’s generally because a tenant — or a property manager on a tenant’s behalf — has enrolled in a so-called rent reporting program. These services are meant to provide tenants with the opportunity to grow their credit history through on-time rent payments.
“The good news is that there are a lot of them out there,” said Matt Schulz, chief credit analyst at LendingTree. “It’s certainly been a growing space over the last few years.”
If you fall behind, however, those services can also hurt your credit, experts say. And whether you report your rent to the bureaus or not, debt collection efforts for late or unfulfilled rent payments can also be a black mark on your credit.
The Consumer Financial Protection Bureau began accepting complaints about rental debt collection in August 2023. Since then, there have been roughly 10,960 consumer complaints about rental debt collection in the U.S., per CFPB data through Feb. 21.
If you’re a renter or plan to be, here’s what you should know.
Rent reporting can help the ‘credit invisible’
Rent reporting can especially help those who are “credit invisible” or do not have any credit history. If you’re looking for ways to grow your credit, such platforms can be a helpful tool.
Those who have enrolled typically see their credit scores increase. When rent payments are included in credit reports, consumers see an average growth of 60 points to their credit score, according to a 2021 TransUnion report.
But if you fall behind on your rent payments, that activity could be also reflected in such tools, and in turn, your score, experts say.
What’s more, rent reporting services are not always free and do not always report the data to all three major credit bureaus, experts say. For example, rent reporting platform Rental Kharma charges $8.95 a month after an initial setup fee of $75. The service reports the data to two of the three bureaus: TransUnion and Equifax.
How rent can appear as a debt collection
Even if you don’t use a rent reporting service, your landlord has the ability to report late or unpaid rents to the credit bureaus via a debt collection service, said Chi Chi Wu, a senior attorney at the National Consumer Law Center, a nonprofit headquartered in Boston.
Rent delinquencies sometimes appear in credit reports if a tenant leaves a unit and the landlord claims the tenant owes back rent or damages, she said. The landlord in this situation will then send that amount to a debt collector.
The addition of any paid or unpaid collections tradeline — amounts of allegedly past-due accounts appearing on consumer credit reports — of at least $100 to a credit report will reduce a score of 680 by more than 40 points and a score of 780 by over 100 points, according to a 2014 report by the CFPB, citing the FICO 8 scoring model.
But the impact of a collection tradeline will depend on variable factors like your current score, the score model and even how recent the collection is, experts say. It could be less impactful once paid.
“If the debt collection items are a few months old, that’s going to hurt a lot more than if it’s a few years old. It’s very variable,” Wu said.
Here are some key factors to keep in mind about how your track record as a tenant could affect your credit history, according to experts:
Rent reporting services
1. Do you actually need it? Check out if you would truly benefit from reporting your rent payments, Wu suggests. Experts point out that it’s more of an advantageous tool for those with weaker credit history.
“It’s not the same value for everyone,” said Adam Rust, director of financial services at the Consumer Federation of America.
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“For some people, their credit may already be good. So it won’t make much of a difference, whereas for others, particularly those who have no credit history or a thin file, it could be very important,” Rust said.
2. Does the service cost anything? Some rent reporting services are free of charge, others require a fee that can range from $6.95 to $9.95 a month, according to Apartment List. Some services charge a one-time enrollment or setup fee that can cost from $25 to $95, the site found. See if it would come at an additional cost to you or if your landlord covers any of the fees.
3. Does the service report to all three major bureaus? It makes sense to confirm that the rent reporting services report your payment history to all three credit bureaus, Schulz said. Sometimes the service will report to one or two of the bureaus, but not all three — which can mean a limited or uneven effect on your credit.
“It’s something that people don’t always think about,” he said.
4. What data does the service report? Some only share on-time, in-full rent payments to credit bureaus while others might include late-payment activity, experts say. And even if they only report positive history, if you’ve paid on time for eight consecutive months and all of a sudden the record is blank, future landlords and lenders might be able to connect the dots, Wu said.
Also remember that “life happens,” she said. “Look at all of these federal employees that are out of a job right now. They didn’t think they were going to be late on rent either, and they had secure jobs.”
Rental debt
Affected tenants may have inaccurate information reported to the credit bureaus. From August 2023 up until Feb. 21, there have been roughly 1,697 complaints about false statements or representation about debt collection related to rent, per CFPB data.
If you understand there is inaccurate or erroneous information on your credit report, you have the right to dispute that information under the Fair Credit Reporting Act, a law that governs credit reports, tenant screening reports and background checks, Wu said.
“You have the right to dispute it,” she said. But keep in mind that it has been historically difficult to dispute reporting errors that involve debt collectors, Wu said. Creditors typically will take the side of the debt collector.
“It’s like a judge that always rules for the defendant or a referee that always makes the call for the home team,” she said.
Even if you decide to ultimately pay the collection item on your credit report, with the exception of medical debt, it does not immediately go away, Wu said — it just appears as “paid.”
Under the provisions of the Fair Credit Reporting Act, adverse information like debt collections may remain on your credit report for seven years.
In 2022, the three credit bureaus announced voluntary changes to remove some medical debt from credit reports, which included paid off medical debt and unpaid debt under $500, Wu said.
Outside of that, the item stays as a “ding” on your credit report even if you pay.
“So paying it off might not solve the problem,” she said. One thing you could do is “pay-for-delete,” or pay the debt collector for them to kick the collection line off your credit in return, she said. If you decide to go through this route, make sure to get the agreement in writing, Wu said. You may want to consult legal experts about the idea.
Similar to your landlord — if you’re going to end your lease early, and you get the landlord’s “OK,” get the agreement and any details on your outstanding balance or obligations in writing.
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Nearly 2 million federal student loan borrowers who’ve requested to be in an affordable repayment plan are stuck in a backlog of applications, waiting to be approved or denied, according to new data recently shared by the U.S. Department of Education.
The Education Department disclosed the information in a May 15 court filing in response to a legal challenge lodged by the American Federation of Teachers. The teachers’ union sued the Trump administration in March for shutting down access to income-driven repayment plan applications on the Education Department’s website.
IDR plans cap borrowers’ monthly bills at a share of their discretionary income with the aim of making their payments manageable.
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In late March, the Trump administration made the online applications available again, and said that it pulled the forms because it needed to make sure all repayment plans complied with a court order that blocked the Biden administration’s new IDR plan, known as SAVE, or the Saving on a Valuable Education plan.
Trump officials argued that the ruling had broader implications for other IDR plans, and it ended up removing the loan forgiveness component under some of the options.
The backlog complicates things for borrowers as the Trump administration restarts collection activity. The Education Department estimates that nearly 10 million people could be in default on their student loans within months.
Without access to an affordable repayment plan, student loan borrowers can be suspended on their timeline to loan forgiveness and at risk of falling behind and facing collection activity.
‘The opposite of government efficiency’
In the May court document, the Education Department disclosed that more than 1.98 million IDR applications remained pending as of the end of April. Only roughly 79,000 requests had been approved or denied during that month.
Consumer advocates slammed the findings.
“This filing confirms what borrowers have known for months: Their applications for loan relief have effectively been going into a void,” said Winston Berkman-Breen, legal director at the Student Borrower Protection Center.
The Center said that if the Education Department continued to move at its current rate, it would take more than two years to process the existing applications.
AFT President Randi Weingarten called the backlog “outrageous and unacceptable.”
“This is the opposite of government efficiency,” Weingarten said. “Millions of borrowers are being denied their legal right to an affordable repayment option.”
What’s behind the backlog
A spokesperson for the Education Dept. blamed the backlog on the Biden administration, saying that it “failed to process income-driven repayment applications for borrowers, artificially masking rising delinquency and default rates and promising illegal student loan forgiveness to win points with voters.”
“The Trump Administration is actively working with federal student loan servicers and hopes to clear the Biden backlog over the next few months,” they said.
The Biden administration put the student loan borrowers who’d enrolled in its new IDR plan, SAVE, into an interest-free forbearance while the GOP-led legal challenges to the program unfolded. Many of the currently pending IDR requests are likely from borrowers who are trying to leave that blocked plan to get into an available one.
Sarah Sattlemeyer, a project director at New America and senior advisor under the Biden administration, said that the current backlog began last year “and has existed across both the Biden and Trump administrations” as a result of the legal battle over the SAVE plan.
“It is a demonstration of how complicated the loan system is, how much uncertainty there has been over the last few years and what is at stake,” Sattlemeyer said. “There also isn’t clarity around how some applications in the backlog should or will be handled, such as those where a borrower chose an option that no longer exists on the application.”
In recent months, the Trump administration has terminated around half of the Education Department’s staff, including many of the people who helped assist borrowers.
That is also likely one reason why so many of the applications haven’t been processed, said higher education expert Mark Kantrowitz.
“Perhaps the reduction in staff is affecting their ability to process the forms,” Kantrowitz said.
The Trump administration’s resumption of collection efforts on defaulted federal student loans has far-reaching consequences for delinquent borrowers.
For starters, borrowers who are in default may have wages, tax returns and Social Security payments garnished.
But involuntary collections could also have a “spillover effect,” which puts consumers at risk of falling behind on other debt repayments, according to a recent report from the Federal Reserve Bank of New York,
As collection activity restarts, disposable income falls
“We were obviously somewhat concerned about potential spillovers to delinquencies on other types of debt,” the New York Fed researchers said on a press call earlier this month.
“During the period where people were not required to make payments on their student loans, they could have used that money to pay their credit card bills and auto loans,” the researchers said. “Now they have to make these payments again on their student loans, so that could put pressure on their ability to pay these other loans.”
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The U.S. Department of Education’s crack down on student loan repayments could take billions of dollars out of consumers’ pockets, reports show. Monthly collections on defaulted loans may reduce disposable personal income between $3.1 billion to $8.5 billion a month, according to research by JPMorgan.
“Part of the reason that some people are adding to credit card debt is because they have student loan payments — that’s the spillover effect,” said Ted Rossman, senior industry analyst at Bankrate. “Something’s got to give.”
‘It’s just money that can’t go to other financial things’
Until earlier this month, the Department of Education had not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments. That on-ramp officially ended on Sept. 30, 2024, and the Education Department restarted collection efforts on defaulted student loans on May 5.
Whether borrowers face garnishment, or opt to resume payments to get current on their loan, that’s likely to have a significant impact on their wallet.
“It’s just money that can’t go to other financial things,” said Matt Schulz, chief credit analyst at LendingTree.
After the five-year pause ended and collections are resumed, the delinquency rate for student loan balances spiked, the New York Fed found. Nearly 8% of total student debt was reported as 90 days past due in the first quarter of 2025, compared to less than 1% in the previous quarter.
Currently, around 42 million Americans hold federal student loans and roughly 5.3 million borrowers are in default, according to the Education Department. Another 4 million borrowers are in “late-stage delinquency,” or over 90 days past due on payments.
Among borrowers who are now required to make payments — not including those who are in deferment or forbearance or are currently enrolled in school — nearly one in four student loan borrowers are behind in their payments, the New York Fed found.
As borrowers transition out of forbearance and into repayment, those borrowers may also face challenges making payments, according to a separate research note by Bank of America. “This transition will likely drive delinquencies and defaults on student loans higher and could have further knock-on effects for consumer finance companies,” Bank of America analyst Mihir Bhatia wrote to clients on May 15.
In a blog post, the New York Fed researchers noted that “it is unclear whether these penalties will spill over into payment difficulties in other credit products, but we will continue to monitor this space in the coming months.”
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