If you’re a tenant with aspirations to buy your own place, a good credit score will be vital when it comes to making mortgage applications.
The Landlord Today website has some tips for tenants looking to build a credit score, either to buy a property or secure their next rental home.
1. Know your credit rating
Don’t wait until you’re at the stage of applying for a mortgage to research your credit score, check it over time so you can take action to improve it well before you are looking for a loan. A look at your scores with the main referencing agencies, Equifax, Experian and TransUnion at least annually will give you a good picture of your credit-worthiness.
2. Make sure all your loans work for you
Many people use finance agreements to fund a car without realising that this is a loan which impacts on your credit score - in a good way if you’re paying it off each month. However, make sure that you have shopped around for a deal - and car - you can comfortably afford. If it leaves you struggling, it could have a negative impact on your score.
3. Paying your rent contributes too
For tenants, your rent is almost certainly your biggest monthly outgoing, with reports that some renters in London spend up to 75% of their salaries on a place to live. If you fall behind on your rent, court action will have a big effect on your credit history. However, if you always pay on time, there are software platforms to record this and have it recognised in your score.
4. Don’t get behind on your bills
From utility bills to mobile phone contracts, these monthly outgoings could affect your score if you miss a payment. This could prove tricky for renters, with fuel cost set to soar this winter. Plan and budget for the extra costs. Paying by direct debit helps spread your bills across the year.
5. Don’t take on someone else’s debt
If you’re sharing a house, be careful that a flatmate’s poor budgeting doesn’t affect your credit rating. If your name is on the bill, you will be liable and chased for any debt. It’s an idea to decide who will have the direct debits for the house’s bills taken out of their account and for everyone else to set up standing orders to the bill payer.