The pandemic and economic recession pushed lenders to be tighter and more selective with loans and lines of credit in 2020.
For those looking to borrow, every little bit counts when it comes to getting access to the best interest rates and terms. Could self-reporting more financial details to the credit bureaus be an easy win?
Rent, utilities, and even Netflix payments can all go toward helping your credit score. Before you decide whether it makes sense for you, here’s what you should know:
What Is Self Reporting?
Describing it as “self reporting” is a bit deceiving, because an individual cannot actually contact the credit bureaus directly to report credit information or payments.
Self reporting refers to giving the credit bureaus (Experian, TransUnion, and Equifax) permission to view your accounts and payment history for things that are not automatically reported. This process still involves the use of some third-party service as individuals themselves cannot report directly.
Before considering self reporting, it’s important to remember what information is already reported to the bureaus. Loan payments are reported automatically: student loans, auto loans, personal loans, mortgages, and most credit cards.
“Chances are your general credit card should report, but sometimes you get these niche credit cards that may not,” Ted Rossman, an industry analyst at CreditCards.com, says. “When in doubt, pull your credit report” to check and confirm exactly what accounts are being reported and included. You can usually check your credit report for free once per year, but in light of the pandemic you can do it for free weekly through April 2021.
After you’ve determined what’s already being reported, consider what other payments you make consistently and often that could benefit your credit if they were considered by the bureaus.
Reporting Your Rent
Rent is the biggest monthly expense for many households and “it’s unfortunate that it’s typically not counted,” Rossman says. But there are some measures you can take to ensure this expense helps your credit.
There are several programs available that will report your rent to credit bureaus. Rossman points to a few of the more popular programs when considering how they might be able to help people:
- Experian RentBureau: Experian RentBureau is free, and reports only to Experian.
- Rental Kharma: Rental Kharma reports to TransUnion and Equifax, and has a $50 startup fee and a $8.95 monthly fee
- Rent Reporters: Rent Reporters reports to TransUnion and Equifax, and has a $94.95 sign-up fee with a $9.95 monthly fee after that.
- LevelCredit: LevelCredit charges $6.95 per month and reports to TransUnion and Equifax.
Renters must sign up for a service, then the company will reach out to the landlord every month to confirm the tenant paid on time, usually via an email or text message. This system requires “some commitment from your landlord,” Rossman says, but shouldn’t discourage you from trying.
If your landlord doesn’t cooperate and properly report your rent payments, you may be penalized, so make sure they have a clear understanding about what’s expected from them before you sign up. And if you can’t get a commitment from them to partner with you, you’re probably better off working to improve your credit in other ways.
If you want to ask your landlord to cooperate and help you self report your rent, here’s a script you can use as a starting point for an email or conversation:
I’ve lived in your property/building for_________ months, and always pay my rent on time. I would like this to reflect favorably on my credit score as I’m looking to build my finances.
I’m signing up for _______ service to report my rent payments to credit agencies. I’ll pay the monthly fee, all you would have to do is answer the email/text once per month confirming that I’ve paid rent on time. It’s very minimal work on your part and would help me out a lot!
Let me know if you have any questions I can answer for you.
Other Credit Builders
Credit builder products work to increase your positive payment history by including recurring payments that aren’t automatically reported.
Experian Boost factors utilities payments into your credit report. This means if you pay your water, electricity, cellphone, internet and natural gas bills on time, you can help your credit with Experian Boost. Experian Boost also includes Netflix payments.
“Experian Boost is a no-brainer,” Rossman says of the free service. “You can opt in and then if it doesn’t work, you can opt right back out.”
eCredable Lift by TransUnion adds 24 months of utility payment history to your credit report by accessing your utility accounts directly. It costs $19.95 per year.
UltraFICO Score includes more than just utility payments. It accesses your banking history for data such as your savings balances, length of account history, and frequency of transactions.
Be Mindful of Your Financial Goals
It’s important to keep your financial goals in mind when actively building your credit. What are you working for? When people talk about building their credit, a lot of times it’s to eventually get a mortgage.
“That’s the aspiration,” Rossman says. “A lot of times the mortgage is the holy grail.”
If that’s the case, it’s important to keep track of which bureaus your self-reporting services are reporting to. If your services are only reporting to one of three bureaus, “that wouldn’t really help you so much,” Rossman says.
The best case, assuming all of your payment history is accurate and positive, would be for your services to report to all three bureaus. When you apply for a mortgage, typically they’re going to look at the middle of your three scores.
“It’s like Olympic diving. They’re going to throw out the high score, throw out the low score, and look at that middle score,” Rossman says.
While reporting to all three bureaus is ideal, it’s more common that a self-reporting service will only report to two out of three. In general, “the more the merrier,” Rossman says.
It’s also important to consider the cost of these credit-building tools, which, for some, are not insignificant. But if the goal is that mortgage, then a few points difference in your credit score could make a significant difference in your rate, Rossman says.
Even a few extra points can be really beneficial, and the average user of Experian Boost, for example, gets 13 points, according to Rossman.
“Especially if you’re on the margin of getting approved or unapproved, that boost can be really significant,” Rossman says. And you can always stop paying for the extra reporting services after getting a mortgage.
But if a mortgage or other big loan is not in your near future, then weigh the cost versus the benefit of these tools carefully. And remember, the most surefire way to build and maintain your credit history is to simply make on-time payments to existing loans and credit cards.
Lenders have gotten a lot stricter. It’s harder to get a new line of credit now than it was six months ago, so “anything you can do to truthfully improve your score is really worth it,” Rossman says.