Improving your credit score

Renting a house and credit checks. How does this topic pertain to you? Did you know that when you borrow money and pay it back you are building credit history? That’s exactly what happens. A credit report will outline information about how you use your credit card and when you make payments. It will also include information on where you live and work as well. Credit bureaus such as Trans Union and Equifax maintain your file and track all of your credit history. When you need a credit report for yourself, these two companies will provide it to you at a cost.

Up until this point, all of my blog posts have dealt mostly with the sale and purchase of homes. I have not written any articles on rentals, especially on how they relate to credit checks of prospective tenants. With that being said, the city of Mississauga is home to a lot of renters. From time to time, I get approached by a lot of renters that are struggling with finding rental units because their credit scores are very low. And for this reason, I would like to shed some light on some reasons as to why credit scores are low and how to better improve those scores.

So then what is a credit score. Simply put, it’s a number that creditors use to assess your credit worthiness. Each time you show good credit use, you get positive points. If you show poor credit use then points are taken off. Therefore, your credit score is the total of both the positive and negative points.

So then what if don’t own a credit card or you’ve never borrowed money? What happens then? It’s easy. You have no credit history and therefore no credit score. In my opinion, no credit score is much better than a low credit score. It shows no risk at all. The only option available to you would be to start establishing a credit history for yourself by applying for a credit card and using it responsibly. Conversely, when you apply for a rental unit, and you have no credit score or a very low score, you will need to get the signature of a guarantor who will assume the risk if you fail to pay rent.

How do you better your score? It’s simple. Make loan and bill payments on time. This is crucial. Paying them on time shows that you are being responsible. This will increase your score each and every time. Making late or no payments will lower your score. If you’ve had low credit scores over the last few years and are looking to improve your score, it may take a few months to adjust your score. Consistently paying on time is the remedy to this problem.