You might already know that credit impacts your renting application, but did you know that you can actively build credit while you’re renting?
Rental payments can be documented through a rental-reporting service, which boosts your credit score and history. That’s not the only way to boost your score. In this guide, we’ll cover how renters can optimize their lives and leases to capitalize on better credit. Whether you have a good score or want to build yours up, these 5 actionable tips will help you turn renting into a credit-boosting technique.
1. Create a Credit File
A lot of rental tenants have a “thin” credit file. In other words, they have few to no existing accounts on their record.
Many may also have invisible credit, meaning they have no credit reporting history with any of the three major credit reporting bureaus in the U.S.: Experian®, Equifax®, and TransUnion®.
Without a credit history, or a marginally thin one, it is difficult to generate a credit score. Without a score, you’re unlikely to get approved for things like loans, cars, or better credit cards. So, by renting, you have an excellent opportunity to begin building a credit report that demonstrates trustworthiness and reliability, by paying a bill you already budget for each month.
To start your credit file, you can:
- Get a secured card through a reputable lender
- Report your rent a credit bureau
- Become an authorized user on a card of someone with good credit
- Take out a small, secured loan through your bank and repay it over time
- Finance some purchases with interest-free payments through Affirm
Secured cards and loans are excellent for those with no credit file because they use your own money. So, instead of just being given a line of credit on good faith, you give a monetary deposit to the bank or lender in exchange for credit.
This helps you gradually build trust and good payment history through a file without jeopardizing your current budget. Secured cards are also great for people with small budgets who do not want to take out credit cards with high interest rates.
Speaking of which, always check the interest rates on any loan or card, including store credit cards. While they’re easy to sign up for, most have extremely high interest rates that can make repayments difficult and negatively impact your debt-to-credit ratio.
2. Report Your Rent
Did you know that paying your rent on time can actually help you build good credit? When you report rent, it tells credit bureaus that you’re actively making payments on time. This can help you as the resident can help establish a credit history with consistent activity.
Resident-Link helps people raise their score by 75% on average, and 100% of residents who were originally unscored now have a score.
We work with major property management partners like Greystar and Avenue5 to make rent reporting accessible and convenient. All you need to do is sign up through your resident portal at your property then let us do the work.
3. Manage Your Expenses
If you have a credit card, then be mindful of how often you use it. Regular spending and repayment build credit, but frequent use can also work against you.
Credit utilization is the amount of credit you have used versus how much you have been given by a lender. Establishments look at your credit utilization to determine creditworthiness, and your utilization has a large impact on your overall credit score.
Many novice credit borrowers focus only on payments, unaware that repeatedly borrowing money still counts toward their score. Even if you always make payments on time, having too much outstanding credit works against you.
Before you ever make a purchase, consider how much outstanding credit you have versus how much you’ve been given.
A good credit utilization is below 30%, so it’s always a good idea to pay off your balance in full when possible.
For example, if you have a credit card with a $2,000 limit, you should have no more than $500 outstanding at any point in time. This would leave you with a credit utilization of 25% on that card.
4. Keep Things Secure
Identity theft and credit fraud are more common than you may realize. Protecting your credit is easy with an identity theft tool like IdentityIQ. This identity theft platform protects you against cyber-attacks and identity fraud, which affects 1 in 4 Americans annually.
You should also use an antivirus and VPN on your devices. This makes it harder for any cybercriminals to gain access to your personal details and banking information.
Avoid saving your debit and credit card information on retail sites as well. If their servers are ever breached, which they often are, anyone could take your credit card information and use it.
Make sure that you also get your three free annual credit reports each year from the three major credit bureaus. If you see anything inaccurate or suspicious, contact your lender right away to file a dispute. They will then investigate and update your credit report accordingly.
5. Get Started NOW
Credit helps you do everything from getting approved for a loan to buying a house. A good credit history isn’t just about approval ratings, however. It also affects your credit limits, interest rates, fees, and even your insurance rates and utility security deposits.
By building your credit score with what you have now, you can move closer toward greater financial benefits and flexibility with your credit options.
The key is knowing the right way to start building your credit history.
At Resident Link, we report up to 24 months of rental history to credit bureaus. These 2 years can help you establish a reputable, reliable credit history even if you had zero to start with.
The Bottom Line on Building Credit with Rent
Through low-risk, secure cards, rent reporting, and proper credit utilization, you can easily boost your credit score. Focus on taking advantage of the opportunities you have now, like your lease. Sign up for a free account with Resident Link to turn renting into your credit-building tool.