Is your credit score standing between you and your next apartment? No need to stress, there are several ways to improve your credit score.
Landlords look at prospective renter’s credit scores to prove they are able to pay rent on time. Sometimes, when torn between prospective tenants, landlords will simply look to the credit scores to decide who gets to lease the unit.
Before you panic, read up on how you can raise your credit score so you can get into your next apartment.
Breakdown of Credit Score Calculation
Knowing how credit scores are calculated will make it easier to understand how to improve yours. Credit allows consumers to purchase without paying immediately.
Your credit score is a number that reflects how well you borrow money. When your credit card bill comes around, if you are able to pay it off entirely, you will have a good score.
If you spend too much on credit and aren’t able to pay it all off, you credit score will suffer. Furthermore, if you pay off your credit balance before the bill comes around, you will also decrease your credit score, as you haven’t allowed yourself to go into debt, even though we are taught from a young age to never get into debt.
It’s a pretty ironic, double-edged sword, but you need to know how to wield it to win the battle of life! Other variables contribute to your credit score, but there are four main factors.
The first, how long you’ve had credit/payment history is a large contributor. Second, how much credit you use compared to how much credit you are allowed to use.
Third, the amount of new credit you accumulate. Fourth, the type of credit you have.
These are some of the key factors credit companies use to determine your credit score. Just checking your credit score can cause it to drop!
Again, you don’t want to treat you credit card like a debit card and pay off a purchase immediately, as this defeats the purpose of having a credit card and will hurt your score.
What you want to do is make sure you only use your credit card for purchases you know for sure you will be able to pay when the bill comes around. That way, when you get the bill, with interest mind you, you will be able to pay it on time, which will better your score.
Bill pay falls under your payment history, and decides thirty five percent of your overall credit score. Always pay your bills on time!
The amount of debt you owe versus the amount of credit you are entitled to is known as credit utilization. You really only want to use ten percent of your entire credit, as you don’t want to appear dependent on credit to pay for your livelihood.
Think of it this way, if you are allowed to spend $5000 on your credit card each month, you really should only be spending $500 each month so you have a ten percent credit utilization.
Granted, most people have student loans, a car payment, or even a mortgage, which will make their total debt a lot more than just their $500 credit card debt. The goal is to eliminate these massive debts slowly but surely to decrease your credit utilization and increase your credit score.
If you can’t get your own credit card, find a family member or friend with excellent financial standing to let you be an authorized user. This makes it possible for you to piggy-back off of their credit score, as you are an authorized user on their credit card.
The catch is that your credit will impact their credit, too, so it may be difficult finding someone with an awesome credit score to allow you to be an authorized user. This person will have to be not only someone you trust, but someone who trusts you.
If your credit score is less than 600, open a secured credit card to improve your score. A secured credit card requires you to put down cash at first so you have a line of credit.
This way, should you end up spending too much on credit, you have the initial upfront collateral to save you. It is vital whoever supplies your secured card reports to the three major credit bureaus, so your score will improve!
Rent Payment is Payment History!
An easy way to improve your credit score is to have your landlord send your rent payment history to credit agencies, specifically the agency or agencies you go through. This is great for teens and early twenty-year olds who otherwise don’t have any sort of credit to start building credit.
Having your landlord submit your rent payment history is the optimal method, but if they are not willing to do so you can submit it yourself with a rent reporting service, however you will have to pay for it.