The credit score dilemma…and a solution for renters
Renters want to make the jump from renting to owning a home, but are often discouraged by many factors. They might be ready and willing, but one thing they lack is a qualifying credit score. Late payments are an issue, but in most cases slow credit is the main issue. You might fall into the category of a responsible adult that knows how to limit spending and protect your credit score, but it still isn’t working and you’re really don’t know how to change that.
Most people would advise you to open a credit card or line of credit. That certainly has its benefits, but can have a negative effect on your score if your debt to income ratio is out of balance. What I mean by that is, your debt outweighs your income and doesn’t allow a whole lot of purchase power.
Do apartments report credit?
Yes and no. There are certainly apartment complexes that do report credit, both good and bad. For the most part, apartment complexes often only report bad credit. That’s not very helpful. There is a way to get your good payment to count. For a subscription fee, Rent Track will become a middle man between you and your landlord. Basically, you pay them online and they pay your landlord or property manager. Personally, I think this is a wonderful way to get your good payment history noticed. Just remember, that it can backfire if you are late. It’s a two-edged sword. It works amazing if you are a highly punctual individual, but if you are late, there is no grace and you’re back on the boat of bad credit.
Parents just don’t understand… some landlords don’t either.
If you are in a situation where you rent from your parents or a landlord that doesn’t know the first thing about reporting credit history, you aren’t without hope. Rent Reporters has a paid subscription that can help you and your landlord report your payment history. The best part of it all is that they can go back up to 24 months. That’s an incredible tool if you have a landlord willing to log your payment history. The effects on your credit score often show up within a couple of months.
Borrow from yourself
This tip is sometimes overlooked. It’s a secured line of credit. I have personally used this technique and it worked well. It’s not going to give you 100 points, but it will give you a boost. Basically, a secured line of credit is an extension of credit that’s secured by your own money as collateral. To simplify: the bank lends you a small amount of money while freezing the same amount of money you have in savings. I’m not big on debt, so when I used this technique, I only borrowed $200. I then set up an auto payment to withdraw the money every money. It works and my credit made some progress upward!
Piggy back on your sibling’s credit
This last technique has the least impact on your score, but it’s worth mentioning. It’s one of the first things I did to revive my credit score.
If your family member or spouse has a credit card that has a long history, they can add you as a secondary card holder. The biggest hurdle to cross is asking them to add you on. You risk rejection and possible hurt feelings. It only adds a tiny bit to your credit score, so if it’s an uncomfortable situation…don’t do it. It’s not worth a relationship.
P.S. There is no real way to buy home (expect for cash) without good/great credit. It’s super important. Use it responsibly.