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.
More on Credit & Money Management
-
Stock Market Today: Bitcoin, Boeing Shine as Stocks Slip
Digital World Acquisition sizzled, too, ahead of tomorrow's merger with Trump Media & Technology Group.
By Karee Venema Published
-
Stellantis Recalls 285K Vehicles Over Airbag Problems
Defective airbag inflators on certain Chrysler and Dodge vehicles could rupture and cause injury or death, NHTSA says.
By Joey Solitro Published
-
403(b) Contribution Limits for 2024
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 Published
-
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 Published
-
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 Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Last updated
-
How Much Life Insurance Do 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 Published
-
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
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
-
5 Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Rates are high this year, but you can still find an affordable loan.
By Daniel Bortz Published