Learn 6 ways that renters can increase their credit score, and why it's important for renters to strengthen their financial health.
Nearly 50% of Americans have poor or nonexistent credit scores, which limits their access to lending, housing, and other financial opportunities. Here are six strategies to help renters improve their credit score.
Whether you’re buying a new house, shopping for car insurance, or trying to get approved for a rental apartment, your credit score is often the first factor that lenders or landlords look at to determine your financial health.
With inflation and economic uncertainty on the rise, it’s important that renters evaluate their finances and find opportunities to strengthen their financial health — beginning with their credit score. Here, we explore what a credit score is, why it matters, and six strategies to increase your credit score.
Your credit score is typically a number between 300 and 850, and it predicts how likely you are to pay a loan back on time. Credit bureaus calculate this number using a scoring model with information from your credit report. The factors that go into this calculation include:
A “good” credit score, while subjective, typically means a score of 680 or above. A score higher than 740 is considered excellent.
That said, there is no one credit score per person. Instead, there are many credit scores available to you — and lenders — because this score depends on the data used to calculate it, the scoring model, the source of your credit history, the day it was calculated, and a host of other factors.
In other words: your credit score reflects a single moment in time, and can fluctuate based on your credit behaviors and data from your credit reports. It’s not set in stone, and requires ongoing monitoring and financial responsibility.
This three-digit number is a track record of your ability to borrow money and pay it back within the right time frame and agreed-upon terms.
A high credit score demonstrates that you are a trustworthy person to lend to, particularly if you borrow money frequently and always pay it back in full and on time each month. The higher your credit score, the more reliable you are in the eyes of lenders, and the easier it will be to get approved for new loans or lines of credit in the future.
Some of the most common situations where your credit score impacts your life include:
All this is to say: almost all of your most important financial decisions involve your credit score. That’s why it’s important to take steps to increase your credit score and prove your trustworthiness to lenders.
While it may seem daunting, improving your credit score can be simple with the right strategies in place. Here are a few ways to stay on top of your finances and strengthen your credit score:
Paying bills on time is one of the most effective ways to raise your credit score because it shows lenders they can depend on you. To stay on top of bills and avoid missing payments, you can set up automatic payments, add due dates to your calendar, or send reminder notifications to your phone. You should also keep an eye on your checking account to make sure you have enough cash on hand to pay bills and credit card balances in full.
While using a credit card helps you build your credit history, it’s best to focus on reasonable, everyday purchases like groceries or gas, rather than big expenses you can’t afford to pay off. Being responsible means paying off your balance each month on time and using your credit consistently — but not overspending. The bottom line? Try to avoid spending money you don’t have.
Lenders want to see that you have a history of using credit and paying it back. For this reason, it’s important to start building your credit history now if you haven’t already. Start with one credit line such as a credit card — rather than opening multiple cards at once — and focus on using it frequently for everyday purchases, then paying it back in full at the end of the month. Once you get in the habit of using it responsibly, you might consider opening a new line of credit.
If you rent your home, another great way to improve your credit score is by leveraging rent reporting tools. Some rent payment platforms allow renters to report their on-time payments to the three major credit bureaus. This enables individuals to boost their credit score with rent payments, a major monthly payment that is normally not included in credit reports. The payoff is significant: in a large-scale Credit Builders Alliance-sponsored pilot program, 97% of participating residents stated that reporting their on-time rent payments was an effective way for them to build their credit.
For people who haven’t yet built a strong credit history, another option is to ask a responsible family member to add them as an authorized user on their account. This means that the primary cardholder is agreeing to add you to their account — and you benefit from their responsible credit behavior and payment history. While this is only a temporary solution, it can be a good start if you are just beginning your credit journey.
Contrary to popular belief, closing a credit card account — even if you’ve paid off your debts — can actually lower your credit score. Why? When you close an account, your maximum credit limit across your credit lines is lower. So if an old account has been paid in full and on time, there’s no need to close it, even if you don’t use it.
When implementing these strategies, it’s important to note that increasing your credit score won’t happen overnight. But with consistency, effort, and the right financial choices, you can steadily increase your credit score and improve your overall financial health.
With a partner like Azibo, you don’t have to do it all alone either. Azibo’s new Credit Boost rent reporting feature allows renters who pay rent through Azibo to report their on-time payments to credit bureaus through the same platform. For a limited time, start a 3-month free trial (then pay $4.99 per month) and Azibo will report your payments to the three major credit bureaus — Equifax, Experian, and TransUnion.
To get started, simply log into your Azibo account and choose an annual or monthly payment plan. Once Credit Boost is activated, Azibo will begin reporting your rent payments and you'll be on your way to increasing your credit score.
Ready to build your credit through rent reporting? Get started with Azibo today.
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This article and the Azibo Blog in general is intended for informational and educational purposes only. It is not investment, tax, financial planning, legal, or real estate advice. Please consult your own experts for advice in these areas. Azibo provides information believed to be accurate, but Azibo makes no representations or warranties about the accuracy or completeness of the information contained on this article or blog.