Traditionally, mortgage lenders only looked at credit scores to assess a borrower’s creditworthiness. However, credit scores don’t always tell the whole story. Rent payments can be a more reliable indicator of a borrower’s ability to make payments on time.
Fannie Mae has updated its policy to include rent payment history in the creditworthiness assessment. This means that borrowers with good rent payment history may be able to get mortgages even if they have bad credit or no credit history.
To be eligible for this new policy, borrowers must meet the following requirements:
- Be a first-time homebuyer purchasing a principal residence
- Have a credit score of at least 620
- Have been renting for at least 12 months
- Have rent payments of $300 or more per month
- Have bank accounts that document the most recent 12 months of recurring rent payments.
If you meet these requirements, you may not need to do anything extra to have your rent payments considered. However, it’s a good idea to check with your lender to make sure.
If you pay rent digitally, you may be able to have your payments automatically reported to credit bureaus. If you pay rent with a paper check, you may need to enroll in a rent reporting service.
Rent reporting services can be a good way to improve your credit score and make it easier to get a mortgage.