If you're a young professional or student and are looking for a place to live, you're probably curious about the effect of renting an apartment has on your credit. According to Main Street, it's possible to raise your credit score by renting an apartment.
Credit history can get a boost from rental information
This is due, the source noted, to the new methods that credit report agencies are using to gauge credit scores. So, if you're thinking about renting an apartment, it might be helpful to browse through some of the ways credit agencies determine levels of credit.
Rental info can bring widespread increase to credit scores
One way is derived from property managers, who can report what their tenants have paid in rent, reported the source. Main Street drew on information from TransUnion, which offers a service that allows property managers to report the payment of their tenants, noting that it's possible for renters with low credit scores to boost their score by reporting the money they pay in rent.
If you have taken out debt to pay for school or another necessary expense and have seen your credit slightly decline as a result, it may be helpful to consider finding a way to declare the money you've spent on rent – there's a good chance it could push your credit score back up.
The source reported the number of consumers who could see their credit rise as a result of reporting rental payments was significant, as about 80 percent of consumers could reasonably predict a raise in their credit score.
"Many consumers are still recovering from the economic malaise brought on by the past recession, but those consumers who wish to rent can now see meaningful improvements in their credit score after making their first on-time payment," said Michael Doherty, senior vice president of TransUnion's rental screening solutions group, according to the source. "This can help renters who want to purchase homes or cars receive better loan terms, potentially saving them thousands of dollars."
Doherty's comments help to expand on the many good reasons there are for improving your credit score. If you have been thinking about buying a new car, or even thinking about marriage in the future and are worried about being able to take out a mortgage on a home, it's crucial to be attentive to the many ways that you can raise your credit score. Though debt can sometimes seem onerous, taking out loans to deal with important steps in life are often necessary to succeed in the business and commerical world.
Likewise, according to Realtor.com, it used to be the case that reporting what an individual paid in rent could have a negative effect on credit. However, the source suggests today, that is not usually the case. For example, the source noted that the process of renting an apartment – signing a lease and agreeing to pay for a specific number of months – can negatively affect your credit if you choose to opt out of the lease at an early date than previously agreed upon with a landlord.
This process is similar to other types of behavior that can negatively effect your credit. For example, if you continually shift debt from one credit card to another, it demonstrates a reputation for recklessness, which can have catastrophic effects on credit. To avoid this, and improve your credit, being reliable with debt, payments and other forms of loans can be indispensable in cultivating a healthy credit score – sure to be a factor in cultivating a happy life.