Most people are aware that as homeowners, paying their mortgage on time can boost credit – but what about those that rent a home or apartment? If you’re currently a renter who may want to consider purchasing a North Texas home in the future, you will be interested to know how paying rent may affect your credit score.
In the past, paying rent on time didn’t really do much for credit scores; today, it might. According to Experian RentBureau director Emily Christiansen, breaking your lease and failing to pay rent for the agreed to number of months could come back to bite you. Why? When property managers turn the matter over to a collection agency, the unpaid debt may be reported to a credit reporting company. This ultimately means your credit score will likely drop, which can impact your ability to make certain purchases in the future.
Can paying rent on time actually boost your credit score? It depends. If your property manager or landlord is signed up with a service that works with Experian RentBureau, it just may. In 2010, Experian began recording positive rental histories of tenants through Experian RentBureau. If you’re not familiar with Experian, it is one of three of the most important credit bureaus in the U.S. If your landlord or property manager is not signed up with a rental service which reports to Experian, paying rent on time will not likely improve your credit score. However, it’s still important to avoid breaking your lease! When an unpaid debt is reported, it will remain on your credit history for seven years.
Is there a way to improve your credit score on your own? Possibly. If your landlord does not currently report rent payments through a service who works with Experian, you can sign up through rent payment services such as ClearNow or WilliamPaid, two services Experian RentBureau partners with. Once you’re signed up, simply opt-in so that your rent payments will be reported. Pay on time, don’t break your lease, and watch your credit score improve!
Working on your credit score now could pave the way to purchasing your dream home in the future. When buying a Flower Mound home, what’s on your credit report does matter; a bad credit score could prevent you from getting the financing you need to purchase a home.
At Team Nelson, we do all we can to help couples and families purchase the home of their dreams. Contact our Flower Mound real estate agents today for more tips on buying a home!