Renters often want to become homeowner’s but are unsure of their ability to afford a home. One of the biggest concerns I hear is over credit scores. These prospective homeowners know that their credit score has a direct impact on their interest rate. They know interest rates affects affordability significantly and can offset a lower list price.
The California Association of Realtors puts out a “Beyond the Headlines” news alert occasionally and I wanted to share this with any future first time homebuyers that are currently renting.
A good rental history can help borrowers
First-time home buyers planning to purchase a house later this year may have a better chance of qualifying for a mortgage if they have had a history of paying their rent on time.
Making sense of the story. Originally posted on New York Times.
- Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people. The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
- Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
- Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau. Those with average or higher scores did not experience major movement.
- Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
- People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
- However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report. Rent may not have been paid, for example, because the furnace was left unrepaired for months.
Comments(0)