Understanding your credit as a renter

Recognizing the value of having good credit and using it wisely can put you one step closer to renting a home.

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

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 you start building a good credit history:

  • Report your on-time rental payments. Paying your rent on time and in full each month can help you establish and build good credit, but credit bureaus do not always receive the information needed to factor rent payments into your credit score. Rent reporting services are designed to report on-time payments to credit bureaus, and some rental management companies work directly with these services, or you can sign up yourself. Learn more about how to get your rent reported to credit bureaus.
  • Open checking and savings accounts. When you open these accounts, make regular deposits, keep your balance above the minimum and never bounce checks
  • Use credit cards 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 your credit cards on time — and in full — each month, they can help you build excellent credit.
  • Establish credit independently from your spouse. It’s important for each partner in a marriage or relationship to establish their own credit. Establishing credit independently can help you achieve your financial goals and protect against unforeseen circumstances such as 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.

How do you determine if you have good credit? Whether your credit is "good" is determined by:

  • Your credit report, which is an official record of your payment patterns over time.
  • Your credit score, which gives a rating to your credit risk at a moment in time.
report cover page and a credit card

Your credit report

Your credit report is an official record of your credit history that includes money you've borrowed, your repayment history and how much open credit is available to you. Landlords often rely on the information in your credit report, because 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 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 by potential creditors or other entities, which happen when you apply for credit.
affordability meter and a credit card

Your credit score

Your credit score is a single number that helps landlords decide how likely you are to repay your debts. Scores 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 to 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 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, your credit score changes as you go about your daily life, using credit cards and paying your bills, so you’ll need to check it regularly to be aware of any errors 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.