Renting might seem like a waste of money, but these two solutions can help. photo credit: Getty
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Renting might seem like throwing money into a proverbial black hole—but it doesn’t have to. In fact, with the right landlord, it might just improve your long-term financial station.
Take New York-based start-up Stake, for example. Stake allows renters to actually make money off their monthly housing costs. The company matches up to 10% of every month’s rent and deposits it into a savings account on their behalf.
As Stake co-founder Rowland Hobbs puts it, “People spend half of their take-home income on rent in cities like New York or San Francisco. There is no brand or product out there that helps with this massive hit to our wallets. The rent is—as has been said—‘too damn high,’ and renters can’t save for the things they love.”
Stake also offers renters 2% bonuses for keeping their savings untouched, as well as perks like occasional free cleaning services.
“More people are renting than at any other time in the last 50 years; therefore this is now a society-wide challenge,” Hobbs said. “How will renters build equity and savings? My co-founder and I wanted to tackle this problem.”
Stake isn’t the only option for renters looking to get more from their housing arrangement, though. Choosing a landlord that reports rent payments to a credit bureau can help, too.
According to a study from credit reporting agency TransUnion, renters with subprime credit scores—typically considered below 580—can see their scores jump by up to 26 points when their on-time rent payments are reported.
Nathan Grant, a credit industry analyst for Credit Card Insider, says rent reporting can help improve a person’s VantageScore and their FICO 9 score.
“On-time rent payments can be reported to the nation’s credit bureaus, but it’s not standard practice, so it’s an important topic to discuss with your landlord if you want rent to make a positive impact on your credit,” Grant said.
Rent reporting can also open new financial doors for renters, according to Maitri Johnson, vice president of multifamily at TransUnion.
“Including this form of alternative data on a credit report not only has the potential to boost credit scores in the near-term for consumers who pay on time,” Johnson said. “It can also benefit consumers down the road as they look to obtain lower interest rates, qualify for more credit products or gain access to higher credit lines or personal loans.”
Unfortunately, survey data from TransUnion shows that landlords and property managers have been slow to adopt rent reporting technology. Just 17% of multifamily rental property executives say they currently report rent payments.
Renters can encourage their landlords to sign up for rent reporting through TransUnion’s PayLease service or other companies like RentTrack, PayYourRent or Rentler—and it might even help their bottom line. Seven in 10 renters say they’d be more likely to make on-time payments if their rent was reported to credit bureaus. The share is even higher with younger cohorts.
For renters who are unable to sway their property managers toward a rent-reporting service, Grant suggests self-service tools like RentalKharma or RentReporters.