Initially in India it was all about loans and credit cards when it came to maintaining a good credit score. Things are changing now. Timely payment of rent can now significantly contribute to the growth of your credit score, opening doors for improved financial opportunities, easier availability of future loans and a consistent credit identity.
New systems allow tenants in building credit history
Historically, the rental market has been deregulated, and rent is usually not factored into financial calculations, thus disallowing tenants from building credit history based on rent. In a bid to close this loophole, new systems have come up where tenants can factor in regular rent payments on their credit reports.
Eventually it is just about showing your respective lending institution about your trustworthiness and how prompt and easy you are in regularly paying back your money. In this particular case it is the rent. Therefore, you need to always remember that your credit score is not something that you achieve in a day. It is something that you need to maintain over decades. It is like health, you cannot achieve it, you need to regularly maintain it by exercise.
Turning rent into credit: Digital tools that can help
There are several digital products that are making it happen by even providing a rent credit score and residence card database. This takes into account payment of rent as a guarantee of fiscal responsibility like payment of EMIs on a loan or the payment of a credit card.
The idea here is that by taking the payment of rent into account as a credit debt, this facility can hopefully make tenants have improved-way into top quality rental deals, rent loans, and home loans pre-approved.
To utilize your rent payments to enhance your credit score, you can make use of several rent credit score companies. Below are important steps that you need to follow to use such applications.
Steps you need to take to use the application:
- Registration: Download the rent credit score application from Google Play store and register your rent details.
- Reporting: These applications use complex algorithm that calculates your rent credit score based on how often, how much, and how long you have been paying your rent.
- Awards: You are rewarded with timely payments, and in the period of financial crisis, you can be offered an advance in rent.
- Clearing doubts: If in doubt, reach out to the customer support service.
Enhancing your credit score with rent payments unlocks several benefits:
- Better loan conditions: A better credit score translates into low interest rate on loans, with tremendous savings for you.
- Better credit card terms: There are higher possibilities of approval with better rewards and benefits on the credit cards.
- Improved renting terms and better tenants: Even landlords consider the credit scores. A good score earns you a good tenant, meaning better quality rental contracts.
- Financial capacity enhancement: Having a good credit score provides you with the power to provide you easier loans. These loans can help you in achieving your life goals like buying a new house, car etc.,
One more technique of credit creation is by paying rent using a credit card. This practice has benefits like earning rewards and improving cash flow but has transaction fees and potentially high-interest fees if the payment is not cleared within the grace period. Weighing the pros and cons carefully is necessary before considering this idea.
Therefore, don’t let your rent payments go unrecognized. By documenting your rent and ensuring it’s reported to credit bureaus, you can begin building a healthier credit report. This simple step can have a significant impact on your credit score and help create opportunities for better financial prospects in the future.
