This is a great question, frequently coming from a potential rent to own client. Do you need credit to Rent To Own a home?
A credit score is one of three things required in order for you to qualify for a traditional mortgage. A credit score is an assigned number that is typically between 300 and 900. The higher your score, the better your credit rating is, and the more likely businesses will lend you money. Credit scores are used to determine how likely you are to default on loan repayments. Credit scores are calculated based on the length of your credit history, your payment history, and the amount of debt you have.
Let us look into reasons why someone may not have credit. If you are a new immigrant or refugee then you may not have a credit score yet-as this takes time to build. If you have steady employment, and down payment but lack the time to develop your credit score, then our Rent To Own a home program could be a great fit for you. You can get into homeownership while you build your credit score, and work towards obtaining a traditional mortgage.
If you are a young adult and have yet to have a credit card, did not take out a student loan, or lease a car, then you may not have a credit score yet. If this is the case, you may want to start to build credit in order to qualify for a traditional mortgage, and our Rent To Own program may be a great way to begin your home ownership journey. As a young adult, you may also find that you haven’t had enough time to build enough credit to buy a home. This, too, could hinder your ability to qualify for a traditional mortgage.
Understanding your credit score, and how credit scores work does not have to be a mystery. There are things that you can do to help to build or improve your credit score so that you can achieve your goals of home ownership. Check out the TransUnion page for 7 credit score myths.
A credit report is a summary of your credit history. When you borrow money or apply for credit, the companies that you apply to send your information to credit reporting agencies such as TransUnion (see link above) and Equifax.
How do you find out your credit score and credit report?
You can find out your score for free by going to a website such as the one listed below.
We work with our Rent To Own clients to help educate them on how credit works, and how to improve or build their credit scores to achieve a traditional mortgage at the end of our program. If you fall into a category where you do not yet have credit please, reach out to us. We will look at your unique situation and help you determine if Rent To Own is the right fit for you.
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