Chances are that, if you are renting, you are paying out a large percentage of your income every month. But did you know that paying rent doesn’t usually affect your credit – unless you miss a payment that is? It is a frustrating thought that only a negative circumstance could have an impact on your credit score while there is no benefit for routinely paying on time.
Credit While Renting: Track, Manage, and Build It
But there are ways that you can maintain and improve your credit while you are renting. And it is even possible to make your timely rent payments work for you too. More on that later.
Tracking Your Credit
The most important way to get started on the road to a healthy credit score is to understand where your current score sits. A credit score is a three-digit number that ranges from 300 to 850 and they are calculated from the information in your credit report. Lenders and creditors such as banks, car dealerships, and credit card companies use this score to decide whether they wish to enter into a contract with you or not. Employers and landlords also rely on credit reports to make decisions about your financial reliability.
Checking both your score and your report on a regular basis will give you a much better idea of the direct impact that the management of your finances and your debt has. And being more aware can help inform you of what decisions you need to make to improve your financial standing.
You can check your credit score, for free and without impacting your credit, through many online sites. You can click here to do so right now. It is recommended that you check your score on a weekly basis.
This gives you a broad overview of where you are on the roadmap of credit and is an easy way to quickly assess the outcome of your efforts. Do not be surprised if your credit score is a slightly different model from each of the different credit bureaus, as these are simply a scoring model that is based on what information lenders have reported to each of the individual credit bureaus. Creditors and lenders will usually understand why your scores differ and most of them consider other factors when considering your application.
While knowing roughly what your credit score is can be helpful, obtaining a copy of your full credit report will grant you a much clearer depiction of what you could be dealing with. You can request a free copy of your credit report from each of the three largest credit bureaus (Equifax, Experian, and TransUnion) once per year.
Also, for those of you reading this article and you feel like you know you’re in need of a credit repair program that actually works, click here to get that started right now.
Managing Your Credit
It is vital that you regularly check your credit health based on the information you can find in your report. As stated above, through the rights granted to you by the Fair Credit Reporting Act, you are entitled to one free credit report from each of the three major credit bureaus. It is also worth it to note that your credit information is confidential and can only legally be disclosed to someone with a justified purpose or to someone to whom you have given explicit permission.
There are a few different ways that you can actively watch your credit. Many experts say that self-monitoring your credit is one of the best ways to save money and take control of your finances. Finding and disputing mistakes on your credit report can save you from potentially-avoidable credit woes. Any dispute that you file with the credit bureaus legally must be investigated and, if found to be incorrect, be removed.
Another option is to hire a professional credit monitoring service. Some of these services offer perks such as frequent access to your credit score, suggestions for making improvements, and notifications when changes are detected.
The downside to these services is the cost. You may not want to spend more money than you already are, especially if you are trying to build your credit. There are also imposter websites and scammers out there that pretend to offer free credit reports but are often rife with hidden charges and will sell your personal information, including your Social Security number. Be sure to thoroughly vet any company before you hire them.
Building Your Credit
There are a number of methods that you can adopt in order to help improve your credit score. First and foremost is to simply adopt healthy financial habits. While it takes time, this single practice will have the greatest impact on your credit.
Focus yourself on adopting these disciplines and you will begin to see them reflected in your credit score:
- Make Payments on Time: Pay off your credit card balances and your loan installments each and every month. If you can afford to cover nothing more, at least pay the minimum that is due. These kinds of entries carry the greatest weight in regard to your credit report.
- Keep Credit Utilization Low: Your DTI (debt-to-income) ratio likewise carries a lot of weight. You want to keep this number as low as possible, preferably below 30%. This includes credit cards.
- Maintain Open Accounts: Credit age is another thing considered in your credit score. So keep as many of your accounts open as long as you can manage. If you need to close an account, consider downgrading or transferring your limit to another card.
- Avoid Applying Too Much: Each time you apply for a new line of credit, your score drops temporarily. Research the offers available to you before you apply and only move forward with the ones that best fit your needs. Avoid applying for accounts within roughly six months of one another.
Here are a few additional suggestions that could also help you to build your credit score while you rent.
- Open a credit card
- Co-sign a loan
- Establish a joint account
- Sign up for a credit-builder loan
Earlier in this article, we mentioned ways of making your rent payments work in your favor. As most landlords do not report your rent payments to the credit bureaus, you should ask yours whether or not they do. If you pay your rent in a timely manner, it stands to reason that you should be getting the benefits of that financial responsibility reflected on your credit score.
Request that your landlord either sign up for a third-party reporting website or report your rent payments through the property management software that they already use. If they cannot or refuse to do so, there are services that you can seek out on your own.
Some of these services can even put other bills that you may already be paying, such as your cell phone or utilities, onto your credit report as well. Not all of the bureaus take these kinds of payments into account, however, so make sure to check the specifics of whatever service you are looking to hire.
Even if a large part of your income is dedicated toward paying rent each month, it doesn’t mean that you cannot also be maintaining and improving your credit score. Simply by adopting some of the practices and habits outlined above, you can focus your dedication into becoming a powerful tool to make certain that your finances are in the best health possible.
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