For many potential home buyers the most confusing part of the process is trying to get a loan.
Mortgage lenders want to make loans to people who have proven track records of paying their bills. Without this history, getting a mortgage can be hard. Adding in rental history to a credit score could make a big difference for potential homeowners according to a recent article in Businessweek.
Credit reporting company, Experian published a study on almost 20,000 people who pay their monthly rent on time. It found, before adding in rental history, 11% of those looked at had no credit file at all, which makes it almost impossible to get a mortgage. After the history of rental payments was included, 59% had prime credit scores exceeding 700 points. Another 38% had nonprime scores, while only 3% were considered subprime, which is less than perfect or short credit histories.
Two of the national credit bureaus, Experian and TransUnion, have begun incorporating rental payment data into credit files where it can be included in the computation of consumers’ scores when they apply for a mortgage. As more mortgage lenders start considering rental payment history in credit scores more people should be able to qualify for a mortgage and make the move from renting to homeownership.
If you or someone you know is considering buying or selling a home and have question about the process or current market conditions, please feel free to contact me. I can be reached at the MagnumOne Realty office in Roseville (916-899-6571) or by email to firstname.lastname@example.org.