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Understanding your credit

Learning how to use credit wisely and recognizing the value of having good credit can put you one step closer to renting a home.


Landlords want to be assured that you will pay your rent on time every month. One indicator they often use to assess your ability to pay your rent is your credit history. A good credit history increases the confidence of your landlord. Why? Because when you have a history of paying your bills on time, they’ll see you as a good tenant with less risk.

Building your credit

Your credit matters. How you manage your money today will impact your credit history and financial future. But, before you can begin to use credit wisely, you will need to establish your credit. Here are a few tips to help get you started building a good credit history:

  • Have your rent reported. Some rental management companies report rental payment information to the credit bureaus. Paying your rent on time and in full each month can help you establish and build good credit if you are renting from such a company.

  • Open checking and savings accounts. When you open a checking and savings account never bounce checks, make regular deposits and keep your balance above the minimum.

  • Use credit cards responsibly. Credit cards are convenient and easy to use so make sure you use them responsibly. If you allow your credit cards to reach high, unpaid balances, or only pay the minimum amount due, they can cost you hundreds or thousands of dollars in interest. On the other hand, if you pay them on time each month – and in full – credits cards can help you build excellent credit.

  • Establish credit independently. It’s important for both partners in a marriage or relationship to establish their own credit. Establishing credit independently can help achieve your financial goals and protect against unforeseen circumstances like death, divorce or other life changes.

  • Honor your promise to pay. It’s essential that you honor your promise to repay loans or credit cards on time and in the amounts scheduled. Contact your lender or creditor immediately if you are having trouble making payments.

As you can see, establishing good credit involves building and maintaining it. So how do you determine if you have “good” credit? Your creditworthiness is comprised of two components: your credit report and your credit score. Many people use the terms interchangeably, but there are a few fundamental differences.

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    Your credit report

    Your credit report is an official record of your credit history that includes money you've borrowed, your history of paying it back and how much open credit is available to you. Landlords often rely on the information in your credit report as it signifies the likelihood that you will pay your rent.

    The following appears on your credit report:

    • A list of debts and a history of how you've paid them, including credit cards, car loans and student loans.

    • Any bills referred to a collection agency, such as utility or medical bills that you did not pay or paid significantly late.

    • Public-record information, such as tax liens and bankruptcies that may be linked to you.

    • Inquiries made about your creditworthiness, showing how many inquiries were made about your credit and if you were given credit based on the inquiry.

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    Your credit score

    Your credit score is a single number that helps landlords decide how likely you are to repay your debts. Scores range from 300 – 850 points and are based on:

    • Your payment history and ability to repay your debts on time. Late payments will lower your credit score.

    • The amount of total debt you owe, including credit cards, student loans and car loans. If your credit cards are at their limits, this can lower your credit score - even if the amount you owe isn't large.

    • How long you've used credit and how you’ve managed it. If you show a pattern of managing your credit wisely, keeping credit card balances low and paying your bills on time, your credit score will be positively affected.

    • How often you apply for new credit and take on new debt. If you've applied for several credit cards at the same time, your credit score can go down.

    • The types of credit you currently use, including credit cards, retail accounts, installment loans, finance company accounts and mortgages.

    A guide to interpreting your score:

    • Credit scores range from 300-850.

    • Typically, a score over 650 is considered “fair,” while scores over 700 are considered “good” and scores over 750 are considered “excellent.”

    • A good credit score makes it more likely that a lender will loan you money. If you have a higher credit score, you’re more likely to get a lower interest rate and better loan terms.

    An apartment lease is a legally binding contract. Failing to pay your rent on time or terminating your lease improperly will hurt your credit rating.

    Remember that no credit lasts forever, so you’ll need to check it regularly to be aware of any errors that you need to fix and continuously work to keep it strong. Good credit is no accident. It’s the result of discipline and planning. By understanding your credit and the credit evaluation systems, you’re on the right path to realizing your goals. Start today and your good credit will pay off.

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