4 Elements of the Rent Score
1. PAYMENT HISTORY
A tenant’s timely rent payment history accounts for 35% of their total Rent Score. Industry research has shown that past behavior is the best and strongest indicator in forecasting future long-term behavior.
RentCheck not only monitors tenants’ monthly payment obligations, such as rent and utilities. We also track behavior, since events such as eviction or illegal activities can have a significant bearing on an individual’s score. Although each rental account varies, incurring a default on higher-cost accommodation such as a penthouse will damage a tenant’s score more seriously than defaulting on a one-bedroom apartment. One of the best ways to improve your overall score is simply to make consistent payments, on time and in full.
2. DEBT AMOUNTS
Outstanding debt defines 30% of the total Rent Score. In the world of revolving credit – where consumers can borrow as much or as little as they wish up to a certain limit – outstanding debt is more heavily weighted as a negative scoring factor than instalments on traditional loans for a pre-determined amount, such as car financing.
Rent is classified as a type of open account where payment is required in full and on time, much like a car loan or mortgage payment. RentCheck views tenants who chronically miss payments as people who cannot handle debt responsibly. The most reliable tenants are those who maintain no or very low outstanding housing charges. Those with the highest Rent Scores have a rent-to-income ratio of 30% or less.
The remaining 35% of a typical tenant’s account carries less influence in determining their Rent Score. This area includes factors such as: how long someone has been a renter, how frequently may have sought new rental accommodations, or the variety of rental types they’ve handled successfully. A person’s Rent Score improves with every successful accommodation or lease application; over time, these accumulate to strengthen the tenant’s credibility.
3. LENGTH OF RENT HISTORY
The length of time each rental account has been open, as well as the length of time since the account’s most recent activity, makes up 15% of the total Rent Score. So it is possible for a new renter to have a good score, but not the best available, simply because there is not yet enough history (positive or negative) on which to base a full calculation. A good, long and well-maintained rental history results in a more accurate profile of an individual’s behavior over time. Therefore, individuals without an established rental history should begin a rental account as soon as possible. Rent Score histories are retained for 20 years.
4. NEW and VARIED RENTAL ACCOUNTS
New and Varied rental account types each account for 10% of the total Rent Score for a total of 20%. This means even new renters needn’t worry that applying simultaneously for multiple rental units will adversely affect their Rent Score; in today’s market, such behavior does not indicate financial difficulty. However, RentCheck suggests taking on a higher rent payment only when necessary, or when it makes sense financially.
Varied or Mixed rental types is a somewhat vague category, but industry experts note that repaying more than one rental debt indicates that the individual can handle more complex financial obligations. According to RentCheck, tenants whose records show a good mix of rental payments, as well as credit instalment loans, generally represent less risk for both lenders and landlords.
In summary, it helps tenants to know the respective weights given to various components of their Rent Score, resulting in a clearer picture of where to focus their efforts. It all comes down to building a rental history with as few as possible reports (or preferably none) of serious late payments.