What happens when you don’t pay your bills – credit cards, utilities, cell phone, etc. – on time?
In addition to late fees and increased interest rates, if a payment is more 30 days late, then the three major credit bureaus will likely be notified. This ensures that late payment will show up on your credit report, and it may stay there for up to seven years. Because payment history is a major determining factor in your overall credit score — 35% — even one late payment can dramatically affect your credit scores.
Conversely, what happens when you do pay your monthly bills (i.e. credit cards, utilities, rent, etc.) on time?
Legally speaking, absolutely nothing.
There are currently no legal mandates that say landlords or any other creditors (i.e. utility companies, retailers, banks, etc.) must report on-time payments.
When it comes to reporting good behavior, the American credit system is fully voluntary.
If you think that this is unfair and even biased against young people and others who can’t establish or repair credit without taking on debt, you’re not alone. With the recent passage of the Credit Access and Inclusion Act of 2017, a bipartisan group of Congressional lawmakers have taken one important step forward towards changing the system. The bill encourages utility companies, telecom companies, and landlords to report on-time payments to credit bureaus in order to support citizens in establishing or improving their credit scores.
While this is a productive, positive start, the law needs to take it a step further in order to fully fix this problem. Whether or not landlords or creditors report positive credit action is a crapshoot. Legally speaking, they’re not incentivized or penalized either way. Conversely, the benefits for them to use the credit scoring system as a punishment for late or missed payments are still clear.
This leads to the Catch-22 of Credit: in order to establish credit, which is needed to borrow money and qualify for loans, applicants must demonstrate good financial habits. But without ever having borrowed money or taking on loans of their own, it can be difficult to illustrate to potential lenders a track record of responsible fiscal practices. This applies both to credit newbies and to those with a negative history caused by extremely delinquent accounts (e.g. late payments, repossession, debt collections, tax liens, foreclosure, judgments, bankruptcy, etc.) who are stuck in this vicious cycle.
RentTrack was founded with the mission to help people build credit without going into debt. In the eyes of our CEO, Matt Briggs, this is a massive problem for not just tenants, but also for our overall economy. Credit building is key to the financial health and future of individuals and our country as a whole, and it’s been driven by debt for far too long.
“RentTrack set out on this journey because we wanted there to finally be someone on your side in the credit space,” Matt says. “The industry wasn’t fair, but we changed that. Now there’s someone on your team. We’re getting you credit without making you take on debt.”
Considering that it’s harder than ever for first-time homebuyers to qualify because their credit scores aren’t high enough, the practice of not reporting positive credit records has to change.
RentTrack’s mission is to make paying rent easier while giving renters the same credit building opportunities that mortgage holders now enjoy. We were the first company to get all three of the major credit bureaus to have monthly rent payments we report included in credit reports. And we’ve been thrilled to see how people gain 29 points on average by building credit through the monthly rent payments they’re making anyways.
Now, we want to make rent reporting not just an option that individuals can take on themselves; we want to make rent reporting a tenant’s legal right.
We believe that landlords should be legally mandated to offer rent payment reporting as a credit-building benefit.
To help make this idea a movement, we’ve started a petition to raise awareness and support for rent reporting.
Please join us in the fight to make reporting rent payments to credit bureaus a legal responsibility for landlords — and a legal right for tenants.
