The Biggest Credit Hurdle for Renters Who Want To Buy
If you rent, your biggest monthly payment is probably your rent.
And if you’ve been paying it on time month after month, it’s only natural to assume that should help you when you’re ready to buy a home someday. The frustrating part is that, for many renters, those on-time payments have not always shown up in their credit history in a way that helps with a mortgage application.
That’s been a major roadblock for a lot of would-be buyers. The good news is things are starting to change, and that could create new opportunities for renters who have been doing all the right things financially.
Why Credit History Is Such a Big Hurdle
A lot of people assume mortgage denials mostly happen because of missed payments or too much debt. But one of the biggest reasons applicants get turned down is actually a lack of credit history.
According to Zillow, nearly one-third of mortgage applicants, 32.88%, are denied because they have insufficient credit history. In other words, it’s not always that someone has handled credit poorly. Sometimes they just haven’t built enough of a credit profile for a lender to confidently approve the loan.
Zillow puts it simply:
> “Nearly one-third of mortgage applicants are denied a loan because of insufficient credit history, making it the most common reason for a denial.”
That’s a tough reality for renters who consistently pay one of their largest monthly expenses on time, yet may not get meaningful credit for it.
The Good News: Credit Scoring Is Expanding
There is progress happening.
Newer credit scoring models are beginning to look beyond traditional credit accounts and include things like on-time rent payments and some utility payments. That matters because it gives renters a better chance to show their financial reliability using bills they already pay every month.
As Michael Sherman, General Manager and Senior VP at Zillow Rentals, explains:
> “Affordability is the headline in housing right now, and access to financing is a very important part of the story. Credit history is a barrier standing in the way of too many potential buyers. Rent reporting is a direct way to address that.”
One example is VantageScore, which has a newer credit model approved for use by the Federal Housing Finance Agency (FHFA). That’s a meaningful step forward and could help expand access to mortgage financing over time.
A recent VantageScore study found that nearly 4 million U.S. renters could become eligible for a mortgage if their on-time rent payments were counted toward their credit history.
That does not mean every renter will instantly qualify. But it does mean the door may be opening wider than it has in the past.
The Catch: Rent Reporting Is Not Usually Automatic
This is the part many people miss.
Just because rent can help your credit does not mean it already is. In many cases, you have to take steps to make sure your payment history is being reported.
If you’re thinking about buying in the future, even if it’s not this year, starting sooner can make a real difference.
How To Start Building Credit From Your Rent Payments
If you want your rent to work harder for you, here are some smart next steps based on guidance from Experian, the Consumer Financial Protection Bureau, and FICO:
1. Ask if Your Rent Is Being Reported
Start with your landlord or property manager. Ask whether your rent payments are being reported to the credit bureaus.
If they offer rent reporting, make sure you are enrolled if needed.
2. Look Into Rent Reporting Services
If your landlord does not report rent, there are third-party services that can.
Before signing up, check:
- Any monthly or setup fees
- Which credit bureaus they report to
- How often they report payments
Not all services are the same, so it’s worth doing a little homework.
3. Review Your Credit Reports for Errors
Mistakes on a credit report are more common than people realize.
A reporting error can drag down your credit profile or make it look thinner than it really is. Reviewing your reports and correcting any errors is one of the fastest ways to strengthen your standing.
4. Stick to the Basics
The fundamentals still matter. Keep focusing on habits that support a healthy credit profile:
- Pay every bill on time
- Keep credit card balances low
- Avoid applying for several new accounts at once
5. Keep Older Accounts Open
If you have paid off a credit card or loan, don’t rush to close the account. Older accounts can help your credit history by showing a longer track record.
6. Build a More Well-Rounded Credit Profile
Rent history can help, but it may not be the only factor lenders consider. You may also want to:
- Open a secured credit card
- Become an authorized user on a trusted person’s account
These strategies can help you build more depth in your credit file over time.
Why Talking to a Lender Early Can Make a Big Difference
Even if you’re not planning to buy immediately, a conversation with a lender can be incredibly helpful.
A good loan officer can help you:
- Understand where your credit stands today
- Identify what may need improvement
- Create a realistic timeline for getting mortgage-ready
- Learn which loan options may fit your situation
That kind of guidance can save you time, reduce stress, and help you focus on the right next steps.
Bottom Line
The biggest credit hurdle for many renters is not bad financial habits. It’s that their strongest payment history often hasn’t been counted.
That is starting to change, and that’s good news for anyone hoping to buy a home in the future.
Still, this shift will not happen on its own. You have to be proactive, ask questions, and make sure you’re getting credit for the payments you already make.
If you’re wondering how close you may be to homeownership, now is a great time to find out.
Ready to Make a Plan?
If you’re thinking about buying a home and want guidance on what to do next, reach out to Zac Pasmanick with The Zac Team. Zac can help connect you with trusted lending professionals, talk through your goals, and help you build a smart path toward homeownership.
Zac Pasmanick
The Zac Team
Phone: 14045647272
Email: zac@zac.biz
Website: https://mlsinatlanta.com
A quick conversation could show you that owning a home is closer than you think.
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