Twenty-five percent of renters put more than half of their earnings into rent each month, and approximately 50 percent spend more than 30 percent on rent. Rent is the largest monthly expense for many people, which means it’s time to start organizing and prioritizing your finances as soon as possible.
There’s a lot to pay for in the real world. As you’re navigating through the ins and outs of adult life, you’ll notice that other bills on top of rent—like utilities, school/credit card debt, and groceries—start to pile up. You need to find a way to manage all of this; otherwise, your credit score will plummet.
Your credit score plays a significant role in your ability to get financial benefits such as more negotiating power on lower interest rates and easier approval for rental houses and apartments. So how do you juggle your bills AND boost your credit score while renting? Here are seven tips.
Pay Your Rent on Time
Payment history is the most influential component of your credit rating (it makes up thirty-five percent of your credit score). If you consistently pay your rent on time, why not use this positive track record to boost your credit score?
Rent payments have rarely been reported to credit bureaus. For example, in 2017, only 0.3 percent of renters had their rental payments applied to their credit reports. The truth is, there are credit bureaus who can include rent history on your credit report, such as:
Please note, for FICO, the most commonly used versions of the FICO score model do not take rent into account when calculating scores. But there are newer versions, like FICO 9 and FICO XD, that consider it. You can purchase these versions from FICO, or you can possibly get it for free though some lenders and credit counselors.
How Can You Report Your Rent Payments?
Here’s the thing: To apply your rent history to your credit score, your landlord must report it—you cannot self-report your payments.
So first, find out if your landlord or property manager is already in touch with a rent-reporting service. Though it’s still not standard practice, it’s becoming more common for rental managers and companies to report this data.
If they don’t use a service, don’t worry. The good news is, there are various third-party services (both free and paid) that can conveniently report your rent payments to the credit bureaus. You will need to provide information on your landlord/property manager when setting up your account.
Here are a couple of free services:
- Esusu: Esusu reports rent payments to Equifax. This service works directly with landlords and housing providers.
- Zingo: Zingo reports rent payments to Equifax and TransUnion. This service is free but only works if you live at a place managed by a property management company.
And here are a few paid services:
- Rental Kharma: Rental Kharma reports the rent payments you made in the last six months for $50. This may be a great option if you don’t have much of a credit history.
- Rent Reporters: With a sign-up fee of $94.95, Rent Reporters lets you report payments made in the last two years. Then going forward, it’s $9.95 a month. This service reports to Equifax and TransUnion.
- LevelCredit: LevelCredit is $6.95 a month. Not only do they report your rent payments, but your utility payments as well. These are reported to Equifax and TransUnion. You can also apply your rent payment history from the last 24 months on your current housing lease for an additional fee.
Get Credit for Your Utility and Cell Phone Payments
While you’re paying your rent on time, you’re likely paying your utilities on time as well. Services like Experian Boost apply your positive utility and cell phone payments to your credit report.
These will then be factored into your FICO score. The process involves granting Experian access to your checking/savings account (whichever account you use to pay these bills), so they can track and report your payments.
Consolidate Your Credit Card Debt
If you’re juggling multiple payments on several different cards each month, a better option might be bundling your debt into one payment with a lower interest rate. Sixty-eight percent of consumers who consolidated their credit card debt saw their credit scores increase by more than 20 points.
How to consolidate your credit card debt involves a few options, such as:
- Personal loans: Personal loans are an easy way to get access to funds to pay off your credit cards. The interest rate might be lower than your interest rate on your credit cards, but this will depend on your financial situation during the application/qualification process.
- Balance transfer credit cards: We get it—why open up another card when you’re trying to pay off the ones you currently have? A balance transfer credit card allows you to transfer all of your balances to one card. Plus, you might not have to pay any interest for a while; credit cards generally offer a zero percent introductory period. Look for a card that doesn’t carry a transfer fee and has a zero percent interest rate for at least a year.
Pay More Than Once in a Billing Cycle
The second most influential factor to your credit score is your credit utilization. This is your balance-to-limit ratio on your cards or how much you owe divided by your credit limit. A good credit utilization is less than 30 percent.
A way to help minimize your credit utilization ratio is by making multiple payments. If you can afford it, pay down your bills every two weeks rather than once a month whenever you can. This lowers your credit utilization ratio, which will help improve your score.
Diversify Your Accounts
Your credit mix—like auto loans, credit cards, and student loans—accounts for 10 percent of your credit score. Having a diverse blend of accounts and being able to pay them consistently shows creditors and lenders you can adequately manage your finances.
This doesn’t mean you should pursue loans/accounts you don’t need. If you have the opportunity to diversify, you should do so, but don’t overdo it. Taking out numerous loans isn’t worth that 10 percent.
Set up Payment Reminders
A little organization can go a long way. There’s a lot to juggle in your life, so set up payment reminders by jotting down deadlines in your calendar. Paying every one of your bills on time consistently can help in boosting your credit score while renting. Many online services offer automatic payments to be taken from your account each month, which can also be very convenient.
Contact Your Creditors
If you miss payment deadlines and/or are starting to sink in your monthly bills, reach out to your creditors right away to establish a payment plan. The sooner you address the problem, the fewer high outstanding balances you’ll have and the less damage there will be to your credit score.
Here are a few tips when negotiating with creditors:
- Know what you can afford: Prior to your meeting, lay out all of your financial accounts and bills to help you determine what you can pay each month. Set yourself up for success, and be realistic about what you can afford.
- Get help: If you need help in creating a payment plan or need further advice, consider speaking with a credit counseling agency to ensure you’re on the right path.
- Get everything in writing: Once you’ve settled on a payment plan with your creditor, get it in writing before you start paying. Otherwise, terms may change, and you might find yourself in a stickier situation.
Take Control of Your Finances While Renting
As a renter, you have more finances to stay on top of. And meeting deadlines is pivotal in garnering a strong financial standing. Not only will this help you gain a competitive advantage with other financial resources, but a good credit score can give you what you need to live comfortably.
And who doesn’t want that? So whether it’s paying your utilities on time or consolidating your credit card debt, take these key tips to manage your money wisely.