Yes, in some situations. However, this method of boosting your credit score could be one of the quickest and most legitimate ways for some renters.
To better understand how this can happen, there’s one thing to remember when trying to build credit as a renter:
You’ve likely paid your rent consistently for years. Yet none of those consistent payments are recorded on your credit report, not one of them.
At the same time, your friend who financed a car purchase a couple of years ago is now consistently developing good credit without even giving it much thought. Your efforts have been identical; however, the results could not be further apart. It’s not you – the system just wasn’t designed to favor renters.
Rent reporting provides a solution to this issue by providing your payment history to the credit bureaus and backdating allows your past payments (from months or years) to be reported instead of starting from zero. So if you have completed the difficult work of making your rent payments on time, you should be rewarded.
How much of an improvement could backdating truly provide?
If you’ve made on-time rent payments for two years and sign up for rent reporting services which offer backdating for one year, after the credit bureaus receive and review your application (approximately 30-60 days), suddenly that payment history is visible.
This is a big change for people with very little credit history. The difference between being able to get a decent credit score and barely qualifying. Payment history is the most important part of a FICO score, approximately 35%.
Renters who added their rental payments to their credit file saw an average gain of 60 points according to 2021 TransUnion data. This is much more than just a small jump in your credit score; it is the type of jump that can dramatically change your ability to borrow money and could put you in a better credit category.
Who this affects the most
Backdating is not a magic solution for everyone. If you already have a good long history (5+ years) of using credit cards and taking out loans, backdating may add some points to your credit score but likely will not change your world.
But if you are in any of the following categories, backdating can be a dramatic game-changer:
You are in your early twenties and still building credit. You have been renting for two or three years and have always paid your rent on time. Your credit report is nearly empty. Beginning with backdating will establish an immediate history, rather than waiting one additional year to gradually build up history.
Your credit history from your home country doesn’t count in the U.S. You are beginning at zero and have been building from there. Using rent reporting allows you to begin using those monthly payments you are already making to help build your history faster.
You had an extremely difficult financial time about three years ago. You are now slowly recovering. Although your credit report contains some older negative marks, a steady backdated payment history is going to begin to weigh against those negative marks and that will be important.
You’ve simply never heard of this process. This is true for most people. Credit reporting systems don’t publicize their own holes in coverage.
The “overnight” part of this process is typically a stretch.
“Overnight” is a large exaggeration. On average, processing takes 30 to 60 days. In comparison to credit-building processes (where the common advice is to be patient, as it takes many years) 30-60 days with a possible 60 point increase in your score is virtually “overnight.”
It is vital to ensure the backdating is verified. Credit reporting bureaus will not verify unsubstantiated information. Any reputable company will provide some method of verifying your past payment history using such documentation as bank records, lease documents, etc. before submitting your payment history. If a company does not verify your payment history in some manner prior to submitting the information, then that should raise serious red flags.
Before you sign up with any service, check the following:
How far back will they backdate your payment history? Most companies will allow you to backdate your payment history 12 months. However, there are some companies that will backdate your payment history up to 24 months. As your credit history is generally thinner, the farther back they will backdate your payment history, the more likely you will see a positive impact.
Which credit reporting agencies will receive information? Experian, TransUnion and Equifax will not be receiving the same type of information.
Will they report late payments as well? There are two types of companies. Companies that only submit a positive payment history, and companies that submit both positive and negative payment histories. Before committing to any company, you need to know what type of company you are committing to.
The bottom line
For the majority of people, their monthly rent is their largest monthly payment. Before the creation of rent reporting there was no mechanism for you to receive any credit benefit from paying your rent each month. This is no longer the case.
Backdating is the process of providing you with credit for your past payment history. It is not necessary to start at zero. Your payment history is already documented. You are merely receiving credit for it.
