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, but 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 collections are removed from your report when they should be
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
If you have a friend, spouse, or parent with a high-limit credit card with a low balance, you can benefit from their good credit standing by getting added as a user on the account. 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.