Although failure to pay off a lease can hurt your score quite dramatically, paying your installment on time does not help your credit score, because the FICO model does not factor in rent or utilities. You can, however, use a good payment history on an apartment lease to acquire a loan in lieu of a good credit score.
Potential Effects
If you break an apartment lease and the landlord pursues legal action or sends your bill to a collections agency, it will appear on your credit report as a negative item. The effect of breaking a lease on your apartment depends on the size of the lease and the rest of your credit history. A better credit score reduces the impact of a collections account. Collections accounts, however, are the second worst offense on a credit report.
Benefits
If you do not have a credit score or have a very limited credit history, creditors may consider alternative methods of judging your creditworthiness. A good rental history and no late payments helps establish that you pay your bills on time.
Consumer Reports
An alternative to the credit report based on financial history is a consumer report, which relies on vendors, apartments and utility companies to report on-time payments, according to the Privacy Rights Clearinghouse. As of 2010, PayRentBuildCredit and First American Credco are some of the major players in the nontraditional credit score industry.
Tip
It is probably easier to build up your FICO score rather than relying on alternative reports, because most lenders use the FICO model. Consider taking out a small loan and making sure to pay the installment each month. If you already have a credit card, do not use more than 30 percent of its limit.
0 comments:
Post a Comment