Homebuyers

Buying a Home? How On-Time Rent and Utility Payments May Help You Secure a Mortgage

Your credit score is one of the biggest factors lenders consider when deciding whether to approve your mortgage application and what your interest rate will be. And yet for years, that score ignored your rent and utility bill payments.

You could have a spotless payment history and it wouldn’t count in your favor. For millions of renters with a lower or no credit score, that could mean they have trouble qualifying for a mortgage.  

That’s finally changing. Last year, the Federal Housing Finance Agency (FHFA) approved VantageScore 4.0, a new credit scoring model that factors in on-time rent, utility, and even telecom payments, for use on mortgages backed by Fannie Mae and Freddie Mac.

Fannie and Freddie are government-sponsored enterprises that back the majority of the mortgages in the U.S. As a result, they help set the underwriting rules that lenders use when considering whether to lend to you or not.

This spring, FHFA announced that both enterprises are now accepting VantageScore 4.0 across the board. That may open the door for renters who have been quietly building a record of on-time rent and utility payments.

“Responsible people who were invisible to the old system, often younger buyers and first-generation buyers, can now have their track record actually work for them,” said Matt Brown, a Naples, Fla.-based real estate agent and broker associate at William Raveis.

Here’s what this shift means for renters hoping to buy a home, and how to make sure your payment history starts counting in your favor

What Fannie Mae and Freddie Mac’s change means for you

If you’ve been paying your rent on time for years, but your credit history is non-existent, the new scoring model may help improve your credit score.

Keep in mind that rent payments can affect your credit score only under specific conditions. Fannie Mae and Freddie Mac purchase the majority of U.S. mortgages. So, when the enterprises change what they’ll accept, lenders nationwide often follow.

Under the current rules, a documented history of on-time rent payments, verified through canceled checks or digital bank records, can now be factored into your mortgage eligibility.

It isn’t automatic, though. You may need to request your landlord report these payments to credit agencies to have them counted. And a late rent payment may affect your credit score. That’s why consistency matters.

“It rewards the person who has been quietly responsible all along,” said Jethro Adedeji, founder and CEO of Crowned Credit.

For renters who’ve done everything right, that history can now carry real weight when a lender reviews your application.

FICO vs. VantageScore: What do these credit scores look at?

Not all credit scores are created equal.

VantageScore and newer FICO models weigh alternative data, such as rent and utility payments, along with traditional credit accounts.

Older FICO models, which are still widely used in mortgage lending, typically don’t look at rent or utilities.

That’s an important difference: your everyday consumer credit score might already reflect your rent history. Meanwhile, the specific score your mortgage lender pulls may not include this information.

“VantageScore and FICO are both widely used credit scoring models that predict the likelihood a borrower will become seriously delinquent, but they weigh information in your credit report differently,” said Dell Jeanty, a Realtor at Dell Residential in Arlington, Va. “While both consider payment history, credit utilization, length of credit history, credit mix, and recent credit activity, the importance assigned to each factor can vary, which is why consumers often have different scores.”

Since lenders choose which model to use, it’s worth asking your loan officer directly which score they will look at to evaluate your application.

Why a higher credit score matters for your mortgage

A higher credit score can save you thousands of dollars over the life of a mortgage or cost you thousands if your score isn’t as high as it could be.

That’s because lenders often reward borrowers with higher scores with lower interest rates as they’re considered less likely to default on their mortgage payments.

For example, a buyer with a 625 credit score could end up paying $260,000 more in interest on a $400,000 home than a buyer with a score of 700, according to the Consumer Financial Protection Bureau’s mortgage rate tool.

So, what’s a good credit score for a mortgage? Once your score rises above the mid-600s, the more favorable your options become. A stronger score can help you secure a lower interest rate, better loan terms, and even more loan products to choose from.

“It matters enormously, because your score sets your interest rate, and your rate sets your payment for decades,” said Adedeji. “The credit score is not just a gatekeeper for approval; it quietly prices the entire loan.”

Building a stronger score isn’t just about approval. It's about keeping more of your money over time.

How to improve your credit score

The single most important step is making sure your on-time payments are being reported, since payments that go unreported do nothing for your score.

Start with these three steps:

1. Pull your credit reports. Check all three major credit bureaus, Experian, Equifax, and TransUnion, to see exactly where you stand today.
2. Get your rent reported. Ask your landlord if they already report to a bureau. If not, look into a rent-reporting service that can add to your payment history.
3. Add a simple credit-building tool. A secured credit card (where you put down a cash deposit) or credit-builder loan (where you make fixed payments over time) can add to your rent history. Just keep balances low, automate your payments, and let the track record build.

Be patient. Most scores take about six months of activity to generate, and closer to 12 to 18 months of clean, consistent history before you’re mortgage-ready.

And one thing to keep in mind: Many mortgage lenders are still relying on older scoring models that include on-time rent payments. So, it is worth building traditional credit alongside your rental credit history.

Doing both is the safest, fastest path to a strong score and a smoother path to homeownership.