When you find the new rental you want to live in, part of your application process can include a credit check. This practice tells the landlord what type of borrower you are and how likely you are to repay your loans on time. When it comes to rent, it probably is a good indication of whether or not you are going to be handing over your check when it's due. For some, the credit check can make or break getting accepted. A credit score that needs improvement could easily lead to a rejection.
The same issue goes for renters insurance. While everyone needs insurance to protect their possessions, you may be charged a higher premium for insurance if your credit score is less than desirable. Even if you pay rent on time, you are not building or improving your credit.
"So many people pay rent, 100 million every month, yet there isn't a comprehensive solution," Bill Butler, a founder of Rental Kharma, told Dailyfinance.com. "The average renter in the United States is not building their credit by being a responsible renter."
Improving your credit score
To get a better rate on renters insurance and improve your chances of being approved for a lease, you can do a few things to improve your credit score. Currently, Rental Kharma is working to allow on-time rental payments to have an impact on credit scores. For young people without much credit history, building credit through on-time payments would help.
To raise your credit score, you need to pay your balance on time, or at least make your monthly payments. Late payments will likely result in hits to your overall score. You should also try to cut back on the amount of debt that you owe, as a high balance can further the negative effect on your score.
Maxing out credit cards should be avoided if possible, and you should also consider shifting some of your debt so your credit cards aren't nearing their maximum limits. Cards that are near their lending limits can hurt your score. Keeping your balances low is your best bet, but you could also even out your debt if you have more than one card.
If you made a mistake once, such as missing a payment, try to negotiate with your credit card company to find out if you can get the mistake erased and prevent it from affecting your score. If it was truly a one-time mistake, your bank may be willing to erase it from your file.
Most renters can find coverage for as little as $30 a month. To compare renters insurance quotes, visit CoverHound today.