For many hopeful homeowners out there, buying is simply out of the question for the time being. Student loans, career changes and life's many uncertainties have a way of keeping you stuck in the rent zone. While owning a home does miracles in boosting your credit score, there's always more than one means to an end. Be a proud - and smart - renter and take advantage of your situation. Make your rent payment work for you to build credit and bring you one giant step closer to those home ownership dreams.
Build your credit history and watch as your financial life benefits tremendously. Even bad credit tends to win over no credit in most situations. Institutions want to see evidence of your financial responsibility, especially in home mortgage situations. The more you build your score, even if starting from a bad place, the more financial credibility you have to your name. Paying rent allows you to build your credit score if your landlord reports data to credit bureaus - which they should be doing anyway. Not all landlords report, so be sure to ask in your apartment search.
Making any financial payment on time goes a long way in improving your credit score. Think about it. Essentially, you're playing with someone else's money in all terms of credit and not paying that money backlashes with consequences. Don't pay your electricity bill, the lights go out. Don't pay your minimum payment on time, get slapped with a fee. It's important to make as many payments as you can on time and in full - including rent.
More than likely, your landlord is going to want payment in the form of a check, making it difficult to use a credit card. However, it's still possible. Many landlords use digital transactions like direct deposit or electronic payments to accept rent. If this is the case, take full advantage of using rent to build credit. If you're new to using credit, putting rent on credit is a good way to get in the habit of paying cards off monthly. An additional bonus is that it helps diversify your credit use. Pay rent off every month in full and these habits act as a testament to your good credit habits.
One word of warning here. Don't let rent eat up your available credit. Credit score is dependent upon the ratio of how much credit you have available to how much you actually eat up. The lower your ratio, the higher your score.
Use these renter good money habits now, boost your score and reap the benefits in home ownership later.