Rent-to-own housing can be a great option for renters who are looking to eventually own a home but lack the funds for a down payment. However, your credit score still plays a major role in your ability to secure a rent-to-own mortgage. It’s recommended to have a minimum credit score of 620, so it is important to boost your credit score. The actual requirement can vary based on the location and housing market.
The higher your credit score, the more likely you are to secure a lower interest rate, which can save you money and help you own your home faster. For this reason, it’s in your best interest to improve your credit score before pursuing a rent-to-own arrangement. Here are some steps you can take to boost your credit score:
Step 1: Remove Bad Marks on Your Credit Report
The first step in improving your credit score is to obtain a copy of your credit report, which you can get for free. Look for any collections or debts that are impacting your score, and take the following actions:
- Dispute any inaccuracies immediately
- Pay off or make payment arrangements for legitimate debts
- Check back weekly to ensure the removal of collections from your report when due.
Step 2: Pay Down Credit Card Debt
Paying down your credit card debt can have a significant impact on your credit score, even if you’re only making the minimum payment. To maximize the impact, consider using debt consolidation, the avalanche method, or the snowball method.
Step 3: Get Added to an Account in Good Standing
Add yourself as a user on a friend, spouse, or parent’s high-limit, low-balance credit card to benefit from their good credit. This can help improve your credit score quickly, especially if you have a high credit utilization percentage.
Final Thoughts on Boost Your Credit Score for Rent-to-Own Housing Success
While being debt-free may not be realistic before applying for a rent-to-own mortgage, taking steps to improve your credit score can help you secure a better interest rate.
