You can boost your credit rating just by paying your rent? Really?
Yes, it’s true. Even though your rent isn’t credit in the traditional sense, you can use it to help improve your credit rating.
After all, if you owned your own home, paying your mortgage on time would have a positive impact on your credit rating, so why should you miss out just because you rent?
How do I do it?
All you need to do is sign up to Credit Ladder. It’s completely free and safe for both you and your landlord.
It’s really simple to set up too – you just need to sign up and create a standing order with Credit Ladder. Once they receive the money, they’ll then pass it to your landlord and inform the credit reference agency Experian that you’ve paid it. Experian will then add it to your credit report. Simple!
Why your credit rating is so important
It’s a bit like online dating – you want to know a bit about the person before you commit to a date with them, so you’ll have a good snoop through their profile and pictures first. This lets you figure out whether or not you’ll be a good match and will have something to talk about other than the weather (hopefully anyway!)
Likewise, checking your credit report lets lenders have a look at how you currently manage your finances, and how you have in the past, before they commit to lending to you, so they don’t get any nasty surprises.
So, when you apply to borrow money, whether it’s for a credit card, loan, mortgage or even a mobile phone contract, the lender will firstly look at your credit report. It shows them your personal details and all of the credit agreements you’ve taken out over the last six years and how well you’ve managed them.
Lenders can see if you’ve made your credit repayments on time and in full. They want to know that if they lend to you, you’ll make your repayments on time and see that you’re a responsible borrower.
If they look at your credit report and see missed payments in the past, you’ll look like more of a risk to them, and they may be more likely to say no.
Likewise, if you haven’t borrowed before, or have very few credit agreements, they may reject you because they can’t see how you manage your finances. This is called having a ‘thin’ credit file.
And this is where Credit Ladder can really help.
Building your credit rating up
If you do have a ‘thin’ credit file, signing up to Credit Ladder is a great shout. If they can see you pay your rent on time and in full every month, lenders will be able to see that you’re able to manage your money responsibly.
Remember though, if you don’t pay your rent on time, even just once, the lenders will also see this and it could damage your credit rating.
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