It's no secret that your credit score is important. A high credit score can help you get approved for a mortgage, car loan, or credit card. But did you know that you can also use your credit score to your advantage when renting an apartment? Here's how.
What is a credit score?
A credit score is a three-digit number that represents your creditworthiness. It's calculated using information from your credit reports, such as your payment history, outstanding debt, and credit utilization.
How does rent affect your credit score?
In general, using credit to finance your rent can improve your credit score. Rent payments are seen as an installment, which can help your credit history look better. Additionally, paying rent on time and in full can help you build a good credit history.
However, if you have significant credit card debt, paying the rent with plastic can hurt your credit score. If you use too much credit to pay for rent, lenders may view this as a sign that you may not be able to manage your finances responsibly.
Additionally, if you have a high credit utilization rate (your balances are too close to the total amount of credit you have), lenders may view this as a sign that you are likely to default on your debt and will either deny your applications or offer you much higher interest rates than they offer those with credit scores of 700+.
How can I improve my credit score?
There are a few ways to improve credit scores that don't require much more effort than what you're probably already doing. Here are a few tips:
Make on-time and full rent payments every month
Paying rent on time and in full is an excellent and easy way to improve your credit score. Rent payments are recorded as regular, responsible expenses, which can help you build a good credit history. If you can keep your credit history clean, you may be able to get lower interest rates on future borrowing, which could save you money in the long run.
Stay current on your debts, including rent and other debt payments
Debt payments can help improve your credit score. By making regular, on-time payments, you will show lenders that you are a responsible borrower and can handle debt. Rent is one of the most common types of debt, so it's essential to stay current on rent payments as well. If you miss a rent payment, your landlord may take legal action or send you to collections, which could severely damage your credit score.
Keep your credit utilization low
When it comes to your credit score, paying rent can help keep your utilization low. This is because rent is typically paid monthly, which means that your credit utilization will stay low over time. Additionally, paying rent can help you build a good credit history since it shows that you are responsibly using your credit.
The bottom line
Paying rent on time and in full can help improve your credit score. Rent payments are recorded as regular, responsible expenses, which can help you build a good credit history. If you can keep your credit history clean, you may be able to get lower interest rates on future borrowing, which could save you money in the long run.
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Original Source: Credello: Can Paying Rent Help Your Credit Score?
