What to do when a land contract is paid in full? How do I add it to my credit report? I

Submitted by Renee K.

This is a great question. Before your question, no one has ever asked me about land contract homes, so thank you for letting me get this info out!

What’s a land contract?

Real estate land contracts are direct agreements between a buyer and seller. The buyer purchases property directly from the seller without the involvement of a bank.

Why buy a house on a land contract?

For some people, a land contract is a great option for purchasing a home if they can’t get a traditional mortgage. It can let you buy a home while showing on your credit report that you don’t have as much debt in comparison to your income. This is called debt-to-income ratio.

What are the disadvantages of a land contract agreement in real estate?

On the flip side is the reality that the payments you make go directly to the seller instead of a bank. This means your payments may not be reported to the credit bureaus. You may miss out on the benefit of building an on-time payment history with the payments you make. You might think that as long as you have a record of your payments and the seller agrees with you, then you can report this payment history to the credit bureaus yourself. Unfortunately, that’s not the case.

Getting your land contract house payments reported to the credit bureaus

So, how does a land contract work when it comes to credit bureaus? Unfortunately, you are not able to report the payments to the credit bureaus. Only the creditors can report. That means you’re at the mercy of the seller in this situation. You can ask the seller to report your payment history to the credit reporting agencies. That would allow the payments to be added to your credit report.

But, more often than not, individuals who act as creditors in a land contract do not report payment history because they have to pay a fee to register with the reporting agencies and report payments. Consider negotiating with the seller. It may be to your benefit to offer to pay the fee if they are unwilling to do so.

Even if your credit report doesn’t show the payments, be proud of yourself for taking on the challenge of paying for your home and making all the payments so that you own it outright. That feeling of freedom can’t come from your credit report.