A Good Rental History can Help Borrowers

by on January 24, 2012

Many renters are looking at the historic mortgage rates available and wondering how they can jump from paying someone else’s mortgage to paying for their own, with all the freedom’s that this entails. The process can seem very daunting, especially when there is so much bad advise out there.

Here is a little information that should shed some light on how to make your dream of home ownership a reality:

  • Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people.  The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
  • Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
  • Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau.  Those with average or higher scores did not experience major movement.
  • Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
  • People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
  • However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report.  Rent may not have been paid, for example, because the furnace was left un-repaired for months.

It’s extremely important that you seek the advise a licensed professional. This may include the services of a tax adviser or accountant. It most assuredly should include the services of a loan professional and a Realtor.

Feel free to call me to seek my advise when it comes to getting the latest advise of real estate trends, tips and information. My number is 408-839-2125.

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