WINSTON-SALEM, N.C. — Homeownership is one of the most common ways to build generational wealth, but too often first-time homebuyers run into many obstacles when trying to buy a home.
According to an annual report from Apartmentlist.com, the number of millennials who expect to rent forever nearly doubled in the last two years to more than 18-percent.
Matt Landon is a financial advisor with Semmax Financial Group in Winston-Salem.
He said many millennials often have trouble buying a home because they may have a low credit score or are credit invisible.
“This really comes into play with college graduates and a lot of millennials who are starring down credit card debt and different things and they say, ‘I don’t want to incur more debt, I don’t want to bring anything else into things,’” Landon said.
“They say ‘I’m going to avoid credit cards; I’m going to pay cash for everything.’ Which is a good thing, but the downside to that is you’re not building that credit score.”
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Those forever renters are in luck.
All three major credit bureaus and mortgage buyer Fannie Mae recently announced they will allow rent payments towards credit and loans.
Landon said rent is a great measurement of a potential homebuyer making consistent payments.
“With rent, if you can go back several years and show that you’ve been consistently making these payments, it’s going to have a positive impact on our credit score and when you do that, especially if you go back and are able to include these past four, five years if it hadn’t priorly been in your credit score you can actually see a significant jump in your score,” Landon said.
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Landon also said it’s a good idea to start building credit as early as you can.
He recommends that parents co-sign on a credit card for their teens and allow them to make small payments over time to build a credit history.
Here are some companies that offer credit reporting services:
- Rent Reporters: There is a one-time enrollment fee of $94.95, which includes up to two years of reported rental payments. From there, you can enroll in a monthly plan ($9.95 per month) or the annual plan ($7.95 per month). It reports to TransUnion and Equifax.
- Rental Kharma: Initial setup is $50, including six months of past history, and the service is $8.95 per month. It reports to TransUnion.
- LevelCredit: Previously known as RentTrack, LevelCredit charges a $6.95 monthly fee to have your rent and utility payments reported to Equifax and TransUnion. A look-back of up to 24 months is available on your current lease for a one-time fee of $49.95.
- eRentPayment: Free for users. Landlords are charged $3 per transaction or $10 for up to five transactions per month. Reports to Equifax and Experian.
- PayYourRent: Collects rent and reports payments to all three bureaus. Free for tenants, generally set up by landlords.
- Rock the Score: There is an enrollment fee of $48, and ongoing service costs $6.95 per month. There is a $65 fee for reporting up to two years of rental history. It reports to TransUnion and, if the landlord is a property manager, Equifax.
- Esusu Rent: Reports your rental payments to the three major credit bureaus. You can sign up as an independent renter for a $50 annual fee on the Esusu Rent mobile app. (It also has a version offered through landlords.)
- MoCaFi: Free for debit card or MoCaFi app users, $3 per report for online users after the first report. Reports to Equifax and Transunion.
- CreditMyRent: This service charges a monthly fee of $14.95 with no setup fee. There are additional charges if you want past rent reported. It reports to TransUnion and Equifax.
- PaymentReport: A $49 enrollment fee gets you two years of rental history reported to Equifax and TransUnion. Ongoing reporting is free, and you can add an additional roommate or spouse for free. (It also has a version offered through landlords that requires electronic rent payments.)
- Piñata: Free to renters. It reports to at least one major credit bureau, no matter your landlord. If your landlord signs up for a specific partnership with Piñata, your rent payments can be reported to all three bureaus.