Establish Credit While Renting an Apartment with These Score-Building Tips
Without a mortgage to pay, establishing or improving your credit score can seem like a slow, daunting process for apartment renters, especially young, first-time renters. Whether you’re a financial freshman renting your first studio in Seattle or a monetary master looking to crank up your credit score, these tips can help you establish a credit history, boost your score, and demonstrate positive borrowing behaviors while renting an apartment.
Pay Your Credit Card Balance Every Month
Contrary to popular belief, credit cards can actually have a positive impact on your financial wellness, if you play your (credit) cards right. The key is to keep your credit utilization below 30% and try to pay the entire balance each month. If possible, use a credit card to pay for reoccurring payments such as rent and utilities. Depending on the benefits your card offers, you can rack up points, cash back and airline miles while paying for everyday purchases.
Limit Hard Credit Inquiries
A hard credit inquiry is when a potential lender runs an official credit check and can remain on your report for up to two years. Although one or two hard inquiries won’t hurt, making multiple inquiries may reflect poorly on your report. When you’re on the hunt for a new place, ask your leasing agent if they can run a soft credit check or delay the application process until you’ve found the perfect fit.
Pay Bills On Time
Although, paying your utilities each month won’t directly affect your traditional credit scores, it can establish a positive history on your alternative credit score. Alternative credit scores aim to identify responsible consumers who make timely payments for monthly utilities such as phone service, internet, cable, electricity, etc.
Ensure Rent Payments Are Reported to Credit Bureaus
Most large property management companies report your rental payments to credit agencies. A line of positive rental payments may not immediately send your credit score through the roof, but it will help you establish a credit history.
Although most properties already report rental payments, be sure to check with your leasing office if you’re serious about ramping up your score.
In contrast, if you’re past due on rent and have been sent to collections, your score will take a hard hit.
Can I Rent an Apartment with No or Poor Credit?
Searching for your first apartment can be an exciting process until you learn that you need a strong credit score. Maybe you’re a college student without a credit history or perhaps you collected some credit card debt when moving across the country. If you have little or no credit, fear not because there are plenty of ways to rent without a credit history.
- Apply with a Co-signer: A co-signer is someone who vouches for your financial responsibility and is liable for any missed payments. Ask someone you trust, commonly a parent or grandparent, to apply as your co-signer. While the co-signer does not have to be a relative, you’ll want to ensure that you have a close relationship with each other. After all, their credit score is on the line, too.
- Pay 2-3 Months Upfront: Some landlords may require you pay an additional security deposit of two to three month’s rent. Offering to double-up on the security deposit shows you likely have the financial stability needed to be a good tenant.
- Provide Proof of Income: Without an established credit history, you might be asked to present last year’s tax forms or recent paystubs to prove you have a steady income. Showing a property manager that you have long-term financial stability can put you in a better position to get approved for a new apartment.
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