It only takes a few bad decisions or a few months of hard times before your credit score plummets, and once it’s low, it can be very difficult to build it back up. Sometimes it isn’t enough to just make payments on time, and you might need a little help with building your credit history.
An easy way to help build up your credit score is by incorporating rent payments into the calculation. Several programs are available that use your regular monthly rental payments to help increase your credit score, so you can enjoy the benefits that go with that.
Let’s learn a bit more about why building credit history is important and how these programs work in conjunction with your credit history to increase your score.
The Benefits of Building Credit History
Everyone has a credit history, and there are a variety of factors that go into determining your credit score. You can survive with a low credit score, but a higher one will save you money and make it much easier to manage finances.
Better Rates on Credit Cards, Loans and Insurance – An interest rate is the price you pay for borrowing money, and this is often directly tied to your credit score. If you have a good credit history, you will qualify for credit cards and loans with lower interest rates and lower finance charges. Auto insurers use your credit history to help determine your risk and will charge you more for insurance premiums if you have a lower credit score than if you had a higher one.
Higher Chance for Credit Card, Loan and Rental Approval – A good credit score doesn’t automatically guarantee that you will be approved for every credit card, loan or rental, but it sure helps. If one of the factors in a low credit score is previous eviction or outstanding rental balance, then this can seriously damage your chances of securing an apartment rental or a mortgage for a property purchase. A good credit score gives you the confidence to apply for rentals, credit cards, loans and other things that require a credit history.
Avoid Security Deposits – Like approval, having a good credit history doesn’t guarantee waived security deposits. However, if you have a low credit score, you will automatically have to pay security deposits on utilities, and a mobility provider may not give you a contract. If you have a higher credit score, you should have no problem being approved for contracts with cell phones and utilities and will pay less in the long run.
How Do These Programs Work?
If you have a low credit score or no credit score at all as a young adult, it can be challenging to build it up. That’s where these programs come in. They work together with you to build your credit score using your rent payments. So long as you pay your rent on time, your credit score will gradually increase.
Many of these programs usually require either landlord verification or that you make rent payments via their platform. Some remove the difficulty by verifying rent payments using electronic bank records.
These valuable programs offer the ability to improve your credit score and demonstrate a positive credit history at a low cost, as low as $5 per month.
Benefits for All
Rent reporting services are offering a service that benefits both tenants looking to improve their credit scores and landlords, too. According to the Landlord Credit Bureau, one such service, “The landlords who report rent payments through Landlord Credit Bureau currently are enjoying a 36 per cent decrease in delinquencies.” A landlord can now see a prospective tenant’s track record in paying rent, making it easier to distinguish between high-risk and low-risk rental applicants. As more landlords get on board with rent reporting services, more tenants are rewarded with the benefits of improving credit scores.
Utilizing a rent reporting service seems to have mutual benefits for tenants and landlords alike. For landlords, it’s the peace of mind that comes with feeling confident rents will be paid each month. For tenants, it’s the path to a more secure future and perhaps a home or rental property of their own.