{"id":17191,"date":"2022-05-27T14:43:50","date_gmt":"2022-05-27T21:43:50","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=17191"},"modified":"2023-01-04T14:01:30","modified_gmt":"2023-01-04T22:01:30","slug":"how-to-improve-your-credit-score-while-you-rent","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/how-to-improve-your-credit-score-while-you-rent\/","title":{"rendered":"How to Improve Your Credit Score While You Rent"},"content":{"rendered":"\n
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Getting into your dream home often requires a good credit score. Whether you plan to rent<\/a> or plan to own your home, improving your credit score can greatly improve your chances of getting the place you want in a competitive market.<\/p>\n\n\n\n

Renters looking to improve their credit score traditionally had fewer opportunities for credit growth. Thankfully, things have changed and every renter can take steps to improve their credit with some savvy techniques.<\/p>\n\n\n\n

Why is a good credit score important?<\/h2>\n\n\n\n

Your credit score can save or cost you money over time. A good credit score can allow you to get better rates on any opportunities that require financing. This means that auto loans, mortgages on homes, and other loan opportunities will require a good credit score to get the best deal possible.<\/p>\n\n\n\n

Your credit score is a snapshot of your risk as a borrower, and companies use this information to assess how reliable you are likely to be when it comes to paying off your loan. A better credit score means you are considered a lower-risk borrower. You\u2019ll get more lenders interested in offering you deals and will generally get a lower interest rate.<\/p>\n\n\n\n

What happens if you have a bad credit score?<\/h3>\n\n\n\n

A bad credit score–or even a mediocre credit score– can cause you to pay more interest on loans and miss out on the best rewards on credit cards. In fact, the lifetime cost of higher interest rates from bad or mediocre credit can exceed six figures according to Nerdwallet<\/a>. Unfortunately, the same can be true for those who have no credit history. Even if you haven\u2019t missed a payment or done something to ding your credit score, having no score can be detrimental.<\/p>\n\n\n\n

How is your credit score used when you rent?<\/h3>\n\n\n\n

Along with assessing your risk as a borrower, a landlord can use your credit score as an indicator of your general financial responsibility. A person with a high credit score has shown they have a history of financial responsibility and will be considered more likely to follow through with finical commitments like monthly rent payments.<\/p>\n\n\n\n

Landlords and property managers often use credit scores as a way to ascertain potential reliability and generally have a tenant screening process that includes a credit score minimum to rent. If you rent and apply for a new apartment with no credit or a low credit score, you could be passed over for another applicant or required to apply with a guarantor.<\/p>\n\n\n\n

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Learn more: Do I Need a Guarantor or a Cosigner to get Accepted for a Rental?<\/a><\/p>\n<\/blockquote>\n\n\n\n

For this reason, improving your credit score is a great idea, even if you plan to rent long-term. Naturally, if you would like to save up to buy a house in the future, improving your credit score while you rent can ensure that you will have an easier time purchasing a home.<\/p>\n\n\n\n

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Learn more: How to Save for a Home While Renting<\/a><\/p>\n<\/blockquote>\n\n\n\n

How to Build or Improve Credit While You Rent:<\/h2>\n\n\n\n

If you are currently renting, you are likely consistently paying a large amount of your income every month. Traditionally, responsibly paying rent doesn\u2019t affect your credit. Traditionally, only a negative judgment from non-payment would affect your credit score. This can be frustrating for renters.<\/p>\n\n\n\n

Since your rent is likely your largest monthly payment, it makes sense to get the benefits of being financially responsible! Ask your landlord if they currently report rent payments to credit bureaus. Most do not and reporting your regular rent payments can greatly improve your credit score. This is especially helpful if you currently have no credit history.<\/p>\n\n\n\n

Reporting your on-time rent payments can improve your credit score by an average of 40 points<\/a>. Your landlord can sign up for a third-party reporting website like RentReporters<\/a> and may even be able to report your rent payments through their property management software.<\/p>\n\n\n\n

General Tips for Building Credit:<\/h2>\n\n\n\n

If you don\u2019t have a credit history, there are less favorable credit opportunities available to you, meaning it can be a struggle to find a good credit option to help build your credit score.<\/p>\n\n\n\n

For that reason, many people without a credit history avoid getting credit cards for fear of damaging their credit. Thankfully, there are ways to build credit without risking debt accrual or a bad credit score long term.<\/p>\n\n\n\n

Ask to Become an Authorized User on Another Account:<\/h3>\n\n\n\n

While this isn\u2019t an option available to everyone, this trick can be very helpful if you have access. If you have a friend or family member with good or excellent credit who is willing to add as an authorized user on their account, you can essentially piggyback off of their credit<\/a>. You will have a credit card in your name that is linked to the primary cardholder\u2019s account, but you don\u2019t have to use the card to gain the benefits.<\/p>\n\n\n\n

Keep in mind that the primary cardholder is responsible for bill payments. Misuse will directly impact their finances and credit. Few people may be willing to assume the risk of adding another person to their credit.<\/p>\n\n\n\n

If you are added to another person\u2019s account, it\u2019s imperative to use this tactic responsibly. This is an excellent way to boost or build your credit particularly if you are a young adult and have a parent willing to add you to their account.<\/p>\n\n\n\n

Opt to Show Reporting Companies Your Regular Payments:<\/h3>\n\n\n\n

ExperianBoost<\/a> and UltraFICO<\/a> are relatively new platforms that you can opt to join. If you have a limited credit history or low credit scores, these services may help by allowing you to gain a boost for good money management and regular payments.<\/p>\n\n\n\n

ExperianBoost allows you to give read-only access to your bank account so that your utility payments can help build credit. UltraFICO allows you to securely link your checking, savings, and money market accounts giving FICO access to assess your money management skills. If you pay bills on time, keep a savings buffer in your account and don\u2019t overdraft your checking, these can all be factored into your FICO score for a potential boost.<\/p>\n\n\n\n

Get a Line of Credit Through Your Bank:<\/h3>\n\n\n\n

Having good credit history requires that you have a line of credit, and the longer you have an account, the better. Generally, opening a credit card when you have limited credit can result in getting unfavorable terms, but you can mitigate that issue by working with your bank.<\/p>\n\n\n\n

Since your bank has the ability to verify your financial responsibility with your checking and savings accounts, they may be more likely to offer favorable credit card terms than other companies.<\/p>\n\n\n\n

Some banks even offer starter loans that keep your loan amount small. Others may offer credit-builder loans. Credit-builder loans are often small loan amounts and the lender will not give you access to the money you\u2019ve agreed to borrow until you\u2019ve paid the loan in full.<\/p>\n\n\n\n

This is an excellent way to build credit without the temptation to continually borrow more than you can afford. You pay incremental payments until you have paid for the loan and these payments are reported to the credit bureaus.<\/p>\n\n\n\n

If you pay on time, you build your credit score. Simultaneously, you\u2019re building a nest egg that you can use in the future. In essence, it almost works like a savings account. Naturally, the only risk is making a late payment which can damage your credit just like a traditional credit card or loan.<\/p>\n\n\n\n

General Credit Score Improvement Tips:<\/h2>\n\n\n\n

What to do About Poor Credit:<\/h3>\n\n\n\n

If your credit score is poor, many of the credit-building strategies for those without a credit history can help your score improve.<\/p>\n\n\n\n

You can also try these tips to improve bad credit:<\/h4>\n\n\n\n
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  1. Pay bills on time\n