You may believe that your credit score is just a number, right? Wrong! It can affect so many factors of your life, including the rental and home buying process. Continue reading below to learn why your credit score is important and some ways you can improve it!
What is a credit score?
Let’s start with the basics… a credit score is a number between 300 – 850 that is essentially a person’s ‘worthiness to repay a loan’. The higher the credit score, the more reliable the person is for a bank to loan them money. The lower the score, the more risk a bank or lender is taking. Your credit score is created from data of your credit history. It encompasses your repayment history, total amount of debt, number of open credit accounts, and other debt related factors.
Why is having a good credit score important for renters?
As a prospective renter, there are properties that may require certain qualifications for you to rent. These can include having no eviction records, hitting a minimum monthly income, and having good references. As an example, click here to check out our baseline rental qualifications for Cork Valley Properties. Another common requirement, including one of ours, is a minimum credit score. At Cork Valley Properties, we require a minimum credit score of 600. Demonstrating a good credit score to potential landlords shows that you are financially responsible and, with that, will prioritize paying your rent and utilities. Therefore, having a good credit score is very important as a renter so that you can have your pick of potential properties.
Why is having a good credit score important for home buyers?
Buyers need to care about their credit score, too! When you initiate a home purchase as a buyer, banks and mortgage lenders will run your credit report. This will determine the home buyer’s ability to secure a mortage and also the terms that the loan will be. For example, if you have a lower credit score, a lender may approve you for a mortgage with a higher interest rate to protect themselves. Having a lower credit score may also have a lender require you to put more money down for the home. All in all, a lower credit score may create higher up front costs when buying a home. Try to keep your credit score healthy to receive the best terms!
How can I improve my credit score?
So now that we know how important your credit score is to rent or buy property, how can we ensure that it is the best it can be?
- Pay your bills on time and bring all of your accounts to ‘current’ status
- Keep your credit utilization low by paying down your credit cards
- Only open new accounts as needed
- Do NOT close unused credit cards as long as they do not have annual fees
- Dispute any errors on your credit reports
- Always use a secured credit card
We hope this information helps you better understand credit score and provides a few tips to increase your current score! Happy house hunting!