Over the last few months, I have discussed with you a big factor in real estate investing- your credit. We have talked about credit scores, where to find them, checking your credit information, and a multitude of ways to help raise your score.
But what if you don’t even own your own home, and you’re just getting started building your credit? If you’re currently renting, and have an established payment history with your rental payments, keep reading. I’m going to show you how to use that history to help raise your credit score and build your credit.
Using your existing rental payments to help your credit score isn’t a well-known option. First, you should know that you aren’t able to report it to credit bureaus on your own. But, there are agencies that can assist you with the process. Of course, as with all of the other options I have discussed, you must always do your research before beginning the process. Each provider has their own fees and terms that you need to be informed of before signing up. Be sure you are aware of all the sign-up costs and additional fees that will be charged. Many will charge a startup cost as well as a monthly fee for their services. Some agencies will go back in your history up to 2 years but will also charge a fee per previous landlord they have to contact for your payment history. Definitely do your research and compare companies in order to find the best fit for your situation.
Another aspect you need to research is which bureaus each provider will report your history to. Not all rent reporting companies report to all of the major credit bureaus. There is a helpful section in an article by Nerd Wallet that goes into a bit more detail as to which versions of the FICO score that rent payments are typically reported. “The most commonly used versions of the FICO score don’t use rental payment information in calculating scores, but FICO 9 and FICO XD do, as does VantageScore.” It is important to know which scores this will affect so you can seek out lenders that use these scores once you have some rental payments reported. Rent reporting shows as a “trade line” on the scores in which it reports. This will add more history to these versions of your credit score. If you are able to find a lender that uses those scores, and receive a line of credit through them, it may help your other credit scores if used wisely.
Companies that do this
There are actually a good number of sites that offer this service. The Nerd Wallet site previously mentioned above provides a list of the companies that do this, and the fees that they charge. You can use this as a starting point. Make sure to do your research, and check and compare as many websites and services as possible. Read all the terms, fees, and even reviews if there are any listed. Some of the websites also offer live chat features. Make a list of questions that you have and speak with a representative. Make sure that you get all available information and make the decision that best suits your needs for your current situation.
If you’re currently renting, and looking to build up your credit to buy a home and eventually get into real estate investing, use this approach to accelerate your plans.
What do you think about this approach? If you fit the scenario, is this something you will use? Please let me know in the comment section below.