If you are thinking of buying a house in the next few months or in the coming year, a very important factor that can improve your chances for mortgage qualification is your rental history. In other words, whether or not you pay your house rents on time could actually affect your chances of getting a mortgage. Experian, one of the 3 biggest credit agencies introduced a new section to the credit reports of individuals. This new section showed whether an individual is paying rent on time. In other words, those who pay their rents on time will have a shot at improving their credit scores. But now, even negative marks are being added which will show up cases where the checks have bounced or where the tenants have left before the lease was actually over.
A brand new credit report is being planned by both FICO as well as CoreLogic. This is along with plans for a new credit score which will include payment histories from landlords and records related to non-traditional loans such as payday loans. Utility and phone bills will also be added at some point, expanding the purview of the credit report. Rental history information, in particular could start showing up on 1 out of every 5 CoreScore credit reports. This is an important piece of information considering that 35% of the households across the nation were that of renters in 2010. In fact, 75% of the population in parts of New York City stay on rent.
Millions of people could be affected by the incorporation of rental records in the credit report. This would also help those who have not established their credit histories yet, through credit cards or loan repayments, a good example being students and college graduates. Those who couldn’t be scored previously will see the biggest impact. In fact, some high risk consumers saw a jump of more than 100 points when their positive rental records where incorporated in the credit reports. On the other hand, there wasn’t much impact in case of those who already had a very good credit score.
According to CoreLogic it is early days as far as the effects of the new credit report is concerned. This will also provide greater transparency between those who apply for credit and the lenders. Responsible renters have a better chance for qualifying for a mortgage after losing homes to foreclosure in the past.
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