A new analysis by TransUnion gauges just how much the reporting of on-time rental payments can improve consumers' credit scores, especially for those with blemished credit.

Roughly eight in 10 consumers with blemished credit, or 79.1% of those with VantageScores below 641 on a scale of 501 to 990, saw an increase in their score one month after rental payment reporting was added, according to the study. Nearly 41% of these so-called subprime consumers saw their VantageScore increase by 10 points or more.

The finding matters since subprime consumers may not be as risky as they appear to be strictly from a traditional credit scoring perspective, says Tim Martin, executive vice president of the data management company.

Changing demographics are another reason. Following the Great Recession, homeownership rates have declined to 20-year lows as many consumers choose to rent, Martin says. By the end of 2013 the total number of American renter households increased to 40 million, up nearly 5 million since 2007. But despite the existence of millions of more renters, their rental payment histories are not provided to credit bureaus, he says.

TransUnion's research found that, on average, those who became first-time home buyers in early 2012 experienced a 5.2% increase in their credit score in 2013 after rental payment history was part of the score, while the average renter's credit score declined 0.4% over the same period.

Renters overall also benefit from their rental history: 66.7%, or nearly seven in 10 renters included in the study saw an improvement or no change in their credit score after the first month of reporting; nearly 19% of these renters saw a 10-point increase to their score.

TransUnion plans to encourage property managers to voluntarily report to it rental payment amounts, timeliness and outstanding balance on a monthly basis through its ResidentCredit platform. The newly expanded service is free of charge.

Another goal is to share the information with other national credit reporting companies and eventually turn its efforts into an industrywide initiative, Martin says.

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