Function

• When you rent an apartment, you generally sign a lease with your landlord. In addition to laying out the overall terms of the tenancy, the lease usually notes the amount of the rent, when it is due and how and to whom you must pay it. Unless it states otherwise, the lease lets you rest assured that your landlord cannot raise your rent for its duration. Your landlord receives peace of mind that you have signed a legally binding contract that requires you to remit the rent as agreed. In theory, this is a standard creditor-borrower arrangement.
  
  

Limitations

• As Maxine Sweet of the Experian Credit Bureau notes, however, most landlords do not report rent payments -- or late payments -- to the three major credit bureaus. Sweet contends that the process to do so is too cost- and resource-prohibitive, particularly for landlords who have just a few rental payments to report. An item related to your rent tends to appear on your credit report only when something goes horribly wrong.
  
  

Potential

• If you fail to pay your rent, Sweet says, landlords typically will do one of two things (or both). A landlord can get a collection agency after you. This will show up on your credit report as a collection account. Your landlord can also seek a civil judgment against you in court. If she succeeds, the judgement shows up on your credit report. Both actions have negative impacts on your credit. Steve McLinden of Bank Rate estimates that simply walking away from a lease can send your credit score down by 50 points.
  
  

Warning

• If you are thinking about co-signing an apartment lease or asking somebody else to do so for you, proceed with caution. Sweet points out that co-signers run the risk of having a collection account or judgment show up on their credit report if they person they provide support for defaults.
  
  

Considerations

• If you would like your timely rent payments to show up on your credit report, there are services that will facilitate the process for you. In exchange for a monthly fee, rent reporting services will verify your rent details, receive proof each month from your landlord that you paid your rent and then report it each month to the three major credit reporting agencies. Since everyone's situation is different, there's no definitive answer on how this will affect your credit report and score, but it's unlikely to hurt them.