Do we really want to give landlords power to mess with credit scores?
Hoping to buy a home? Be nice to your landlord.
Last year, Experian, one of the three main credit-reporting agencies, added a section to millions of credit reports that shows a person's history of paying rent on time.
That boosted many credit scores.
Now the company plans to note when you've been late with rent, bounced a check or left before a lease is up, which could ding your credit rating.
Two other companies, CoreLogic and FICO, also plan to take into account rental payment history.
I understand the principle at work here, and it's great that on-time rental payments can boost credit scores.
All the same, I see great potential for abuse if we trust landlords to report on whether and when tenants have paid up.
And if you don't think this will impact many people, consider this: Rental history data could show up in one in five credit scores, Joanne Gaskin, FICO's director of product management global scoring, estimated in a New York Times interview.
Call me cynical, but there's reason to believe this could be bad for consumers and their credit scores.
After all, landlord and tenant disputes are among the most common cases in small claims court. Some of the disputes are real. Many more are silly.
I know a landlord who got upset because a tenant didn’t have as many flowers planted in the garden as the landlord would have liked.
Back when I was a tenant, a property manager took the stove apart to see if I had cleaned its inner workings, which he made a condition of returning my security deposit.
Given how well landlords and tenants sometimes don't get along, it would be all too easy for a vindictive landlord to report that a tenant hadn't paid the rent on time.
Or perhaps a tenant is a day late, or a landlord doesn't see the envelope containing a rent check as she's chucking junk mail into the recycling bin.
A battered credit report seems like a high price to pay.
A tenant might even decide to stage an (entirely legal) rent strike in an effort to force a landlord to fix a property's problems.
In most states, tenants can refuse to pay rent when a house or apartment is unsafe in some way, when it's overrun with vermin or when it lacks heating, electricity or other essential services.
What's to stop a landlord from reporting a legitimate rent strike as late or entirely unpaid rent?
If unsafe conditions persist, tenants generally have the legal right to break a lease and move.
But the credit bureaus plan to ding the credit scores of renters who break leases. That hardly seems fair if there's a good reason for breaking the lease.
Yes, the credit bureaus will send you a copy of your credit report, same as always, and as before you can ask them to investigate any negative report or to add a note to your file explaining why a particular situation happened the way it did.
But credit bureau investigations tend to be slow.
You probably can't control whether you get a crazy landlord. But you can pay your rent on time and keep paperwork that proves it:
- Make photocopies of your checks or request copies from your bank.
- If you drop off your rent in person, get a dated receipt.
- If you send your rent by mail, pay a little extra at the post office for a return receipt.
- If you stop paying rent because your landlord won't fix what's broken, carefully document the problem and your attempts to resolve it.
Just the fact that you have documentation may dissuade a landlord from filing a false credit statement about you.