If you’ve ever rented a home, your landlord might have asked for your consent to run a background check on you. This will serve as a way that the landlord can ensure you will be a trustworthy tenant. Contained in the report might be various information. It might include a criminal history, previous address, work information and financial history. This might include your credit score.
What does your background check, more specifically your credit score, have to do with your ability to rent. Well, often, if your background check reveals unsavory information about you, then your landlord might have the grounds to deny your application. In some cases, the things on your background check are uncontrollable. However, one aspect you can control is your credit score. Often, good credit makes renting a financially-secure option.
Why Renters Should Be Concerned About Credit
Your credit score is essentially a measure of your financial trustworthiness. It is a reflection of your spending power relative to how much debt you carry. Scores usually range from around 300 to 850. Scores from roughly 600 upward are often considered satisfactory or very good.
Still, lower scores often show that person has higher risks of financial insecurity. If you don’t have enough credit, it signals that you might not be able to pay your bills and stay out of significant debt. To property owners, this might signal a problem from a prospective renter. They might think a renter with a low score will be unreliable in making payments on their rent, for example. If you can’t pay your rent, this is likely going to be a problem in getting a home.
Also, low credit scores might spell problems in your ability to get renters’ insurance. Many properties require this coverage from renters. Usually, it’s very affordable. Your insurer will likely look at your risk profile when determining your premium. A low credit score might show that you are a higher risk to insure. It might signal that you won’t pay for your coverage, or will need more help in the event that you file a claim. As a result, your insurer might raise your policy’s premium to cover the extra risk you pose.
Therefore, always keep an eye on your credit score. You can usually get at least one free copy of your score every year. You can usually get this score from one of the major credit reporting agencies. Always consider it a priority to continue to build good credit.
Why Credit Scores Drop
Certain mistakes might lead to temporary drops in your score. However, other financial actions might lead to more significant impacts on your score. You should make it a priority to avoid these issues, whenever possible.
One way to make a credit score drop is by carrying too much debt. Credit card balances, mortgages and loans mean you will owe someone else money. When you’re a young person who may not have a lot in the bank, carrying debt might be a bit less worrisome. Most people are going to carry a little debt throughout their lives. However, you still want to create a firmer foundation for your financial future. Proactively work to cut as much debt as possible as time goes on.
Another negative credit influencer is applying for too much new credit. When you get a new loan or new credit card, you might see your credit score temporarily drop. It will often recover in a few months. However, it might also drop significantly if you apply for a lot of new credit all at once. This might signal to creditors that you are desperate for lines of credit to make ends meet.
Credit scores fluctuate over time. Yet, as you build a future through savings and other mechanisms, your goal should be to increase your score. Poor credit scores might make it harder for people to qualify for loans, credit cards and leases. If you let your score continually drop you might get yourself in trouble.
Improving Your Credit
Don’t let your credit rating decline unchecked. There are many ways you can responsibly increase your credit over time.
- Work to pay off credit card debt as conveniently as possible. If you can pay off full balances each billing period, by all means do so.
- Always pay significant loans, like car payments and mortgages, in full each month.
- Spend wisely, and work on building a savings cushion. You should strive to put money away each month.
Finally, don’t obsess over your score or hint at risk. If your creditors catch on that you’re worried, they might wonder if you have something to hide. Your goal should be to pay your own way as conveniently as possible. Most demonstrations of financial responsibility will go a long way towards helping you establish good credit.