Paying Rent On Time May Help You Buy A Home
Credit Reporting Agencies Beginning To Add Rent Payments Into Credit Scores
Posted on January 17, 2012 by Matt.
Many people who are interested in purchasing a San Clemente home or San Clemente condo are finding it difficult to qualify for a home loan because of the stringent requirements lenders have these days, particularly with the size of the down payment and the borrower's credit score. With today's tough economy, millions of Americans have lost their jobs or experienced a substantial decrease in their monthly income, making it difficult to pay bills on time or at all. Over a month ago, we posted a blog ("Bad Credit One Of Many Things Slowing Housing Recovery") about the difficulties potential home buyers are having qualifying for a loan and that something needs to be done to help buyers improve their credit scores. A recent article in the New York Times, "A Good Rental History Can Help Borrowers," highlights an effort by certain credit-reporting companies to potentially improve a borrower's credit score by including rent payment history in the score's criteria.
According to the article, Experian, which is one of the three leading credit-reporting companies (the others being TransUnion and Equifax), added a section to millions of their credit reports last year that shows on-time rent payments; this addition actually helped raise the credit scores of non-delinquent renters, sometimes by 100 points or more for people with lower credit. Two other companies, FICO and CoreLogic, appear to be jumping on the bandwagon as they are currently planning to add a similar field to their credit reports.
This is excellent news for potential buyers who have been renting for a while and have lower credit scores due to either a history of delinquent bill payments or a lack of credit altogether. This move by Experian is particularly helpful to younger buyers who may not have a lot of credit history and can use on-time rent payments to beef up their credit scores. As we wrote in our blog last month, low credit scores are a big factor in the continued lull of the housing market, so anything that the credit agencies can do at this point to help consumers improve their credit could potentially aid in the market's recovery.