Does Renting Count Toward Your Credit Score?

Overview

• Understanding Credit Scores
• Traditional Factors That Affect Credit Scores
• How Rent Payments Can Impact Your Credit Rating
• Take The Smart Path Towards A Strong Financial Future
• Frequently Asked Questions

Your credit score is a number that advises banking and non-banking lenders of your risk level as a potential borrower. The higher your score, the less risky they consider you to be, which may improve your prospects for a successful loan or credit application.

Australia has two key credit reporting bodies: Equifax, and Experian. Credit scores start at zero, with both reporting bodies capping their maximum scores at 1200.

While renting doesn’t directly count towards your credit score, four key factors can make an impact.

1. Payment History

Your payment history has the highest impact on your overall credit score. That history spans 24 months and applies to accounts in your name with licensed credit supporters, including credit cards, existing personal loans, car loans, mortgages and overdraft accounts.

Paying credit accounts on time will generally help keep your rating healthy, while missed or late payments can harm your score.

2. Length Of Credit History

Having a longer credit history shows you’ve managed credit responsibly over time, which usually boosts your score and gives lenders confidence. This is typically reflected in a higher credit score.

3. The Types Of Credit Accounts You Have

Having a mix of credit account types, from secured cash loans to unsecured credit cards, demonstrates your ability to handle different credit responsibilities. This can positively affect your credit rating, but is not as impactful as other factors.

4. The Number of Credit or Lending Applications You Make

Each credit or loan application you submit through a credit provider will initiate an enquiry on your credit report. Submitting multiple applications in a short time period can signal financial stress to lenders and possibly lower your score.

While your rent payments don’t directly affect your credit score, there are circumstances in which rent can impact your credit report.

Bad Rental History And The Tenancy Database

Falling behind on your rent can also see you blacklisted on tenancy databases like TICA and the National Tenancy Database (run by Equifax), which property managers use to screen potential tenants. This sits outside of your credit file, but a poor rental history listing may still make securing your next rental property more difficult.

Rent Arrears And Court Judgments

Given that the Privacy Act 1988 does not classify rent as “credit”, simply falling behind on your payments – or having your debt passed on to a collection service – won’t automatically create a formal “default” on your credit file the way an overdue credit card or personal loan does. The $150/60-day default rule you may be familiar with applies specifically to consumer credit debts, not standard rent.

That said, if your landlord or agent escalates the matter to a tribunal or court and obtains a judgment against you for rental arrears, that judgment becomes public record information. Court judgments can be listed on your Equifax or Experian credit file for five years, whether or not you repay the debt in full later.

The Benefit Of Building A Positive Payment History

At the other end of the spectrum, some lenders may take a positive payment history into account when assessing your loan application. It can show that you have the discipline to maintain your repayment obligations, especially if you’ve been making payments over an extended period of time.

Take The Smart Path Towards A Strong Financial Future

Although renting doesn’t directly affect your credit score, both good and bad repayment histories can indirectly influence it.

There are several things you can do that will count towards your credit score, and some don’t even require a credit card!

Red Tree Finance offers a range of loans for a variety of purposes. Though we do take your credit score into account when you apply, we do consider each application on its own merits. Get in touch with us to see how we can help you.

The information provided in this blog is of a general nature and is provided without considering your specific objectives, financial situation, or needs. It is intended for informational purposes only and should not be relied upon as financial, investment, or other professional advice.Before making any financial decisions or taking action based on the information presented, you are strongly encouraged to assess its appropriateness in light of your individual circumstances. Red Tree Finance does not intend to provide personalised financial advice, and you should seek independent financial, legal, tax, and other relevant advice tailored to your unique situation.