Living in a rental apartment or house? Do you always pay your rent on time and in full? If so, you should be aware of this: rent can affect credit scores. If you’re looking to boost or build your credit, being a good tenant could help.
In the past, rent has not had much of an effect on your credit score. However, that has changed in recent years. Newer services make it possible for those monthly rent payments to contribute to your credit history, just as a credit card or loan would. This can help you improve your credit, or build it up if you don’t have much, or any, history.
Each of the major credit bureaus — Equifax, Experian and TransUnion — list rental payment history on your credit report, as long as they receive the information. You must ensure your rent payments are reported to one or more of the bureaus so they can be included on your credit report.
Having good credit can help you secure loans, credit cards and apartment rentals. A relatively easy way to build or boost credit through your rent is to make your payments online through rent payment systems, which will then turn the information over to the credit bureaus.
Two things you need to remember is -
- Always pay your rent on time and in full: Just as with a credit card or loan payment, always pay your rent on time (the earlier, the better).
- Stay on budget: You have to be able to afford your rent in order to make on-time payments. According to the 50/30/20 budget rule (needs-wants-savings), no more than 50% of your monthly take-home pay should include housing expenses. And if your rent takes up the full 50%, you are probably paying too much.
Overall, having a strong credit score will help you more easily secure a rental, or buy a house with a mortgage.
To rent - Having a low score or no credit history may mean you have to have a cosigner or guarantor in order to rent a home. Many landlords carry out credit checks before granting you a tenancy.
To buy - Building a good credit rating is important for many renters because if you want to buy a home with a mortgage, your credit score will be considered by your mortgage lender. If you have a low credit rating, you may not be granted a mortgage and therefore won’t be able to take your first steps on the property ladder. Even if you’re not planning on buying a property anytime soon, having a good credit score is important because it is also taken into account if you apply for a loan or credit card.
Make the first step towards building good credit today, by signing up for Tenantcube. Make online rental payments automatically, and on time.