Payment history is one of the most important factors in determining your credit score. When you pay your bills on time, you demonstrate that you are responsible with credit–this includes paying your rent on time.
While paying your rent on time won’t directly affect your credit score, there are ways to use your rent payments to build credit. Let’s explore those opportunities here:
Rent Reporting Services
Rent reporting services are the best way to ensure your timely rent payments are reflected in your credit score. These services allow you to report your rent payments to credit bureaus, which can then be included in your credit report and used to calculate your score. A reputable rent reporting company will be able to communicate your positive rent payment history to all three credit bureaus: Experian, Equifax, and TransUnion.
Once these payments are reported to credit bureaus, they will be included in your credit report as a tradeline. This means that your rent payments will be treated like any other credit account, such as a credit card or loan. Paying your rent on time and working with a rent reporting service can significantly boost your credit rating with time. If you need help with your credit health, the costs of credit repair services are well worth the benefits.
Establishing a Positive Credit History
Establishing a positive credit history is an important part of building a good credit score, and paying rent on time will help you achieve this. Credit bureaus are looking to see that you can manage your finances responsibly, and paying your rent consistently on time over months and years will demonstrate this perfectly. Even if you have no other credit history, your prompt rent payments can help you establish a positive credit history that will ultimately contribute to building your credit score.
What Is a Credit Score, and How Is It Calculated?
Your credit score is a number that represents how likely you are to repay your debts, and it’s visible to lenders, who will certainly examine it before making decisions on whether or not to offer credit.
Your personal credit score is calculated based on your credit history, and takes into account first and foremost the length of your credit history and the amount you currently owe or have owed to creditors in the past. It will also take into account the types of credit you’ve had in the past, the consistency with which you’ve made payments, and if there have been any defaults, among other factors. What is a credit reference? This is a document which will lay out your credit score for potential lenders to examine.
Credit scores are typically calculated on a scale of 300 to 850. The higher your score, the better your credit. A credit score above 700 is generally considered to be a solid score and is likely to give you more credit options in the future, while with a credit score significantly lower than this may limit your options.
In Summary
If the process of reporting your payments is handled correctly and efficiently, paying rent can help you build your credit score. How often does your credit score update? This depends on your overall credit status and the credit you have at any given time. So, if you are looking to maintain a great credit track record, keep up with your rent payments and report them regularly to give yourself every possible chance of doing so.