Zillow’s new feature helps renters build credit history

US real estate platform Zillow will introduce credit-building payment reporting so tenants who pay their rent on time can build a credit history and access broader financial opportunities.

Currently, there is a significant gap in credit reporting in the US, where renters spend hundreds of billions of dollars on rent each year, but the payments aren’t reported to credit bureaus.

Under Zillow’s new rent reporting feature, renters who use the platform to pay their rent can opt in for free and when rent is paid on-time Zillow will automatically report the payments to Experian, a major credit bureau.

“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,” Zillow Rentals Vice President Michael Sherman said.

Consumer Financial Protection Bureau data indicates about 26 million Americans are what’s known as “credit invisible”, which means they lack a history with major credit bureaus.

Zillow research shows this a particular issue in Black communities, where residents often pay more in rent than they would towards a mortgage.

Zillow will introduce credit-building rent payment reporting.

This is in part due to limited credit access, a remnant of historic redlining.

In New Orleans, a median renter in a credit-insecure area spends about 77.5 per cent of their income on rent, compared to 28.6 per cent for a typical mortgage.

Reporting on-time rent payments can help renters build or enhance their credit history, an important step in accessing broader financial opportunities. 

Higher credit scores can potentially lead to easier loan approvals as well as better rates for home purchases, credit cards, future rentals and more, with the impact varying based on the credit scoring model that lenders use.

“This new program is all about acknowledging and supporting consistent financial habits,” Mr Sherman said.

“It ensures renters’ largest expense can now work in their favour and potentially help them on their path to finding and securing a place they can call home.”

There are three steps for tenants who pay their rent on Zillow to sign up for the service.

Existing renters can enable rent reporting via the renter payment dashboard, while new renters will be asked if they would like to opt-in when they enrol.

Zillow will then identify on-time payments, if they are made within 30 days of their due date, and report them to Experian on a monthly basis.

Late payments, more than 30 days past due, will not be reported. 

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.