Does Rent-to-Own Help Your Credit?

There are situations in which rent-to-own agreements can help a renter build credit, but renters will likely need to search for those opportunities. Rental information often isn't included in consumer credit reports, which means a good rental payment history may not bolster your credit rating.

Rental Stores

Rent-to-own agreements for appliances, furniture and other items may not help you build a good credit history, since rent-to-own stores usually don't report a person's payment history to credit bureaus. There are exceptions, so shop around by calling rent-to-own stores in your area and asking if they report customers' payments to credit bureaus. It's best if they report to the three major bureaus: Equifax, Experian and TransUnion. You also should ensure that a store's rental contract specifies that it reports customers' payments to credit bureaus before you sign it.

Rental Homes

Some homeowners initiate rent-to-own contracts that give tenants the option to purchase a home after a specified period. A portion of a tenant's rent payments usually goes toward purchasing the home. However, homeowners generally don't report a tenant's monthly payments to credit bureaus. Experian is the only major credit bureau that includes home rental payments in consumer credit reports. Experian's rental information generally comes from large property-management companies, not individual homeowners who initiate rent-to-own agreements for their homes.

PRBC Credit Data

Tenants who have a rent-to-own agreement with a homeowner may be able to convince the homeowner to report their rental payment history to the PRBC credit-reporting agency. PRBC specializes in alternative credit data on home rental payments and other monthly payments that major credit bureaus don't track. Having a good payment history on file with PRBC could help you secure loans with lenders who are willing to consider that data when evaluating your creditworthiness.

Considerations

There are other methods for establishing a good credit history if you can't get a rent-to-own agreement that helps you build credit. For example, consider getting a secured credit card with a company that reports its customers' payment history to the major credit bureaus. Secured-card issuers usually require customers to deposit a specified amount of money into a savings account. That money establishes a credit line for the cardholder, and cardholders use secured cards just like regular credit cards. Make your monthly payments on time and keep your balance low to build a good credit history with a secured card.