Before recommending products to clients, I sometimes like to try them myself.
Everyone in the world of personal finance knows credit is hugely important. Employment, housing, insurance, and even cell phone plans use credit scores to decide what you get and how much it costs you. So, when my organization decided to connect our affordable housing to the resident’s credit, I was intrigued.
We hired Rent Track to report to the credit bureaus when residents paid their rent.
To be clear, I am reviewing their product as an independent consumer for my own apartment, not IBA’s Financial Empowerment Coordinator. That said, here is what I found:
The First Three Months
I signed up for Rent Track in January 2018. I wanted to see how it affected a renter’s credit score, and because I loved the idea. People with mortgages pay monthly for their housing, boosting their score in the process. Why shouldn’t renters reap the same benefits, most of whom are usually of lower-income?
I personally began with a VantageScore of 763 and a FICO of 803 (the meanings of which I’ll leave for a different blog). I was feeling proud of myself for taking the first step, until I saw my FICO drop by eight points.
At first, I was alarmed – that’s the opposite of what’s supposed to happen. I should have seen it coming, however, because that’s how credit works.
Ten percent of your credit score is calculated on ‘New Credit’. In other words, when the banks see you seeking a loan, they freak out because they think you’re scrambling for money you don’t have. The result is a drop in your score, but only temporarily.
After you go without opening an account for a while, they calm down and reset the score to normal. By April, I was back where I was, and my scores began to climb.
The Following Nine Months
Every time we make an on-time payment for an account, it counts as positive ‘Payment History’ – a whopping 30 percent of how credit scores are calculated. The nice thing about Rent Track’s platform is you can automate the rent and forget about it. They even have a feature where you can track your score (although this costs extra).
By September, my scores had climbed to a VantageScore of 770 and a FICO of 813 – eight and ten points higher than their originals. Here they plateaued and stayed that way for the following six months.
At the end of the day, the benefits were marginal for me as an individual. For $7.50 a month, Rent Track sent my payments to the credit bureau, but I would guess it only made my future purchases cheaper by roughly $2 a month given my point increase. While that’s hard math to prove, I still think there’s be a better investment out there for someone like me.
If you have a stable situation, a decent credit score, and bigger fish to fry, Rent Track might not be for you. However, if you’ve had bad luck with credit, your score is in the toilet, and you’re looking to purchase a car or a home, this product might be perfect.
Not only will Rent Track boost your score if you need it, but it also serves to represent ‘housing’ on your record. Mortgage companies and banks are bound to notice responsible rent payments as a plus in your favor.
The second person I would recommend Rent Track to is someone with no credit history at all (what we call credit invisible). If you’re a young adult or an adult who’s avoided credit cards their whole life, using rent to put yourself on the map is a smart move, and Rent Track can help.
As the entire product goes, I was satisfied with my experience and felt more comfortable going to work and recommending it to clients. Hopefully this review can provide some insight for future participants and shine a little light on an obscure corner of the market.
If you have more questions about credit, feel free to leave comments below and I will answer them to the best of my ability – Thanks.