Rent payments are often at least a third of a person’s monthly income and possibly the largest expense that they incur. If you are paying rent on a rent-to-own home, a benefit of possibly high rent payment is putting a portion of it aside for the future down payment on the house.
How Do Rent to Own Payments Reflect on Your Credit?
But at the end of your lease, you still can’t qualify for a mortgage loan through a bank or a private lender because of a low credit score. How could that be if you have loyally paid rent on time for the entire term of your lease?
It could be because the major credit bureaus never received a report from you or your landlord and thus your monthly rent is likely not contributing to your credit profile and credit score.
This next part is critical: don’t be left in the dark about your credit. For starters, click here to get a reliable, secure credit check so you know exactly what you’re working with. And if you know that your credit could use a little help, click here for our bulletproof credit repair program.
It’s a question that many tenants ask: “How will my monthly rental payments of my rent-to-own home show up on my credit report?” It’s a smart question, as the activity on your credit reports plays a key role in determining your credit scores and the future financing options available to you for the purchase of your home.
There are several factors involved in your credit score i.e. credit card accounts, loans, the number of open accounts, etc. Your lenders and creditors will record whether or not you paid your bill on time and will report it to the bureaus. These reports determine your score and whether it will go up or down and, unfortunately, it is a lot harder for your score to go up than it is to go down.
However, unless agreed upon with your landlord or the seller of the property you will be buying at the end of your lease agreement, your rental payments will likely not be reported to the credit bureaus, even if you make your payments on time faithfully every month.
Actually, before we go any further, take a moment to click here to see if you qualify for a rent to own home (so many people are surprised that they qualify).
Now, back to how your rental payments and lease might impact your credit. Unfortunately, there is not a direct avenue you can take to report your rental history and payments to the bureaus on your own. Alternatively, you have the option to use credit reporting services like Experian RentBureau, Rental Karma, and Rent Reporters. Each service will charge a different price and report to a different bureau, so make sure you know the specifics before agreeing to pay.
Make actively sure that they receive a record of your payment, especially if you have a positive rental history. It will add a new element to your general credit profile and, if you continue to pay your rent on time, you can build your credit score.
This is a two-sided sword though. Just as on-time rental payments could potentially have a positive effect on your credit score, if you fall behind on rent or are consistently late every month, it can lead to a negative report and your score could lower. This is especially the case if your debt is sent to a collections agency.
While reporting your rent payments on your rent-to-own home has the potential to build your credit, you can improve it in other ways. Focus on paying off any outstanding loans by making timely payments, use your credit card responsibly, and don’t utilize too much of your available credit if you can avoid it. Consider asking your landlord if you can pay your rent with a credit card, but keep in mind that there may be convenience fees and you may not be able to pay off your balance each month, thus adding interest to your rent payments for the next month.
Remember, one of the best first steps you can take is to simply check to see if you qualify for a rent to own home by clicking here.