Rent Your Way to Good Credit
Paying the landlord and your bills on time can help build your credit score.
Late-night commercials for used cars promise "no credit, no problem." But for the 50 million Americans who have little or no credit -- among them young people, recently widowed or divorced individuals, immigrants and those who proudly operate on a cash-only basis -- it's "no credit, no luck" if they want to get a credit card, take out a car loan or buy a house.
Row 0 - Cell 0 | Making Sense of Your Credit |
Row 1 - Cell 0 | Boost Your Credit Score |
Row 2 - Cell 0 | Why Your Credit Score Matters |
To remedy the situation, Fair Isaac, the company that compiles the FICO credit score, has developed an Expansion score, based on nontraditional consumer-credit data, including deposit-account records and layaway purchases. Compiling nontraditional credit information isn't always easy, says Craig Watts, of Fair Isaac. Most states, for example, prohibit utilities from disclosing the payment histories of their customers. Reporting other types of payments is voluntary, so data can be spotty.
But young people and others without credit may be getting a break. Fair Isaac announced in November that it would include information from Payment Reporting Builds Credit, a Web site that gathers data on rent and other recurring bill payments.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You can enter your info into a Web file, which PRBC charges a fee of $15 to $20 to verify, or set up an automatic bill-payment system through your bank or credit union and have the records sent to PRBC. In addition, PRBC reports include data from RentBureau, a new company that collects rental histories from about four million apartment units.
Surefire solution. The three major credit bureaus also have a spotty history of gathering nontraditional credit records. TransUnion says it includes such data in its files, if it's available. But Equifax is reluctant to report information that's not uniformly available for all individuals. Experian plans to launch its own alternative credit score this year.
Until the new scores catch on, the best way to get credit if you don't have a history is to apply for a secured card at a site such as Credit.com or CardTrak.com.
With a secured card, you make a savings deposit equal to your credit limit. Secured cards generally charge high interest rates plus an annual fee. But after paying your bills on time for about a year, you may qualify for unsecured status and get better terms or apply for a different card. Steer clear of secured cards that charge setup fees.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Stock Market Today: Stocks Waver on Resilient Employment Data
A private reading on payrolls had markets rethinking rate-cut bets just days ahead of the monthly jobs report.
By Dan Burrows Published
-
Lamb Weston Stock Gains After Earnings Beat, Layoff News
Lamb Weston stock is higher after the french fry maker reported earnings and unveiled a restructuring plan that includes job cuts. Here's what you need to know.
By Joey Solitro Published
-
403(b) Contribution Limits for 2024: Good News for Teachers
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
By Vaishali Varu Last updated
-
How to Figure Out How Much Life Insurance You Need
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
By Kimberly Lankford Last updated
-
Amazon Big Deal Days Is Coming! We’ve Got All the Details
Amazon Prime To kick off the holiday season with a bang, Amazon Big Deal Days runs Tuesday, October 8 and Wednesday, October 9. Here’s what to expect.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published
-
Five Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
By Daniel Bortz Last updated