Zillows new system allows you to build credit by paying rent- a win for renters!
Building credit is an essential step towards eventually qualifying for that mortgage loan or car lease. Renting has never helped towards that goal- until now.
However- read on to see what I don't like about it!
People have a lot of issues with renting. First- you're not building equity like you would if you were paying a mortgage. Second- your payments (likely just cash or check directly to your landlord) don't help your credit whatsoever, again, like a mortgage payment would.
Say hello to Zillow- they've created a new system that allows your payments to be reported to Experian, one of the major credit bureaus, at no cost to you or the landlord. Let's jump into how this is helping "credit invisible" Americans establish some credit, especially on Staten Island!
#1: New Concept
#1: New Concept
Zillow is coming out with a new feature that allows renters paying rent (through their platform) to be reported to Experian at no cost.
This is potentially great news for renters looking to build their credit while renting, which is something that's never been done. I also wonder, given that this is so new, if this will have a higher impact on credibility when it comes to getting reapproved for your mortgage, since it's directly related to housing payments. It goes without saying, of course, that you'd better be paying on time!
Zillow is the first to do something like this- but they surely won't be the last. It's exciting to see what features will be rolled out by competition and vice versa, which will only stand to benefit renters more as it unfolds- the beauty of the open market!
#2: Credit Invisible
Nearly 26 million Americans are "credit invisible" which means that, according to the major credit bureaus, they don't (or barely) exist! The thing that sucks about that is you may be paying thousands of dollars per month in rent (we are in Staten Island, NYC after all!) but yet not a dollar of that gets reported. So you have to rely on other little things to build your credit- a car lease, responsible credit card usage, etc... but the biggest thing you're paying for doesn't count!
Now, when it comes time to apply for a mortgage where you hope the bank is going to give you half a million dollars...you're considered a risk! Risk = higher rates. Rough!
This is a great way to build credit. Higher credit = better financing options. Win win!
"Every on-time rent payment is a testament to a renter’s reliability, yet it’s often overlooked in credit reports, and we want to change that. This new program is all about acknowledging and supporting consistent financial habits. It ensures renters’ largest expense can now work in their favor and potentially help them on their path to finding and securing a place they can call home."
Vice President of Zillow Rentals
However, there is something I do NOT like about it:
It will NOT report your late payments
This, to me, goes against what this whole thing is trying to promote, which is for you to build credit by being a responsible renter and paying on time. That's the point of a "credit score"- it shows your overall performance. If your on time payments get automatically reported to Experian by Zillow, but your late/missing payments don't...how does that work?
So, again, I don't feel that it's right that Zillow is essentially praising the good but then sweeping the bad under the rug and it makes this whole system feel a little shoddy. I would believe that if big banks catch on to this, they may feel inclined not to count this whole thing towards your credit worthiness much...and then we're back to square one.
#3: Set It Up
It's pretty simple. Go on Zillow Rentals and enroll. They'll ask you whether you'd like to opt into rent reporting- yes!
From there, you'll automatically receive payment tracking. Zillow will identify all on time payments and report them. What's on time? Within 30 days of due date! Lenient, to say the least!
I, Joseph Ranola, am an Associate Broker at Matias Real Estate, located at 418 Port Richmond Avenue.