NPS Rent Assurance is designed to simplify the rent payment process with safeguards to assure timely payments. We work with property companies who understand that credit scores don’t always tell the whole story about a renter’s willingness and ability to pay their rent on time We also believe that looking at credit the same old way doesn’t really reflect a renter’s desire to make paying rent a payment priority. That’s why our program takes the worry out of monthly rent payments by helping you put aside a portion of every paycheck – like installments in a rent piggybank – to make sure you have enough money in your account to pay your full rent when it’s due.
Credit Where Credit is Due
So that you get credit for all your activity through our program, we report regularly to a national credit bureau, Payment Recording Builds Credit (PRBC), the leading supplier of credit reporting data for recurring payments to the big three credit reporting giants, Experian, TransUnion and Equifax. This process let’s you start to build a credit file that will help you to qualify for the better rates on other major expenses, such as auto loans, car insurance, personal insurance and credit cards.
Just think, your rent will be delivered automatically for as long as you keep receiving a paycheck. Isn’t that the way things are supposed to happen?
How Rent Effects Your Credit
You can save thousands of dollars by having a higher credit score – 700 v. 600, 680 v. 580 – you get the idea. Higher credit scores translate to lower interest rates and lower monthly payments for many of the major expenses we all have at some point. Ironically, a higher credit score earns you a lower interest rate or monthly premium rate for things like credit cards, student loans, life insurance and, of course, apartment rentals.
Why Your Credit Score Matters
Like the cover of a book that gives only a quick impression of what’s inside, your credit score is an imperfect reflection for a lender of how to predict if you will pay your bills (debts) on time. Several factors go into the mix when a lender, like a landlord or an insurance company, “pulls” a credit report. They typically look at:
Your total credit score – higher is better / lower suggests greater risk that bills will be paid
Your credit balances – How much money you currently owe and how regularly you’re “paying down” balances
Your total available credit – Calculated by how much credit you have available to you and how much you owe. Ironically, it’s important to borrow money and pay it back in order to build credit.
Your debt to income ratio – Calculated by how much you owe and how much you earn. No lender wants to see you owing more than you can reasonably afford to pay back.
On-time payments – How often are you on-time or late? Creditors are a funny breed who really like to know they’ll be paid on time. A history of falling behind will hurt your credit score.
FICO scores are an important factor in renting an apartment, however many prospective residents are unaware of their payment history which is a big factor in determining credit scores. Here are a few of the FICO basics…
The primary objective of a credit score is to illustrate to lenders just how likely you are to repay your debts, and while many other types of credit scores are out there, FICO’s is, by far, the one lenders use most to make lending decisions. The higher your score, the more likely you are to get a low interest rate and a high credit limit.
To calculate that score, FICO considers five different factors:
1. How much new credit you have
2. What types of credit you have
3. How much you owe
4. How long you’ve had credit
5. How you’ve handled that credit (payment history)
They’re all weighted differently in the calculation, with payment history carrying the most heft.
Although FICO is secretive about many of the inner workings of its scoring model, FICO’s website openly lays out the numerous components that make up a borrower’s payment history. Those components include everything from information on loan accounts that are being paid on time to accounts that have gone delinquent to any public records, such as bankruptcies and judgments.
A weighty factor
FICO’s scoring system grades borrowers along a range from 300 to 850. If you’re looking to improve your score, focusing on payment history is a smart place to start.
Within the standard FICO scoring formula, payment history accounts for 35 percent of a borrower’s FICO score. (The second-most heavily weighted factor — amounts owed — accounts for 30 percent of a FICO score.) Although FICO has a slightly different scoring model for Equifax, Experian and TransUnion — the three major U.S. credit bureaus which maintain consumers’ credit reports — that payment history percentage is the same for each bureau’s FICO scoring model.
FICO’s research has shown that a person’s payment track record tends to be the strongest predictor of the likelihood that the individual will pay all debts as agreed in the future. In other words, FICO has found that if you’ve handled credit well in the past, you’re more likely to do it in the future, too.
Payment history components
So what goes into your payment history? The data can be broken down into seven components:
Payment information on various types of accounts, including credit cards, retail accounts, installment loans and mortgages.
The appearance of any adverse public records, such as bankruptcies, judgments, suits and liens, as well as collection items and delinquencies.
How long overdue any delinquent payments have become.
The amount of money still owed on delinquent accounts or collection items.
How much time has passed since any delinquencies, adverse public records or collection items.
The number of past due items listed on a credit report.
How many accounts are being paid as agreed.
The FICO score depends on the information in borrowers’ credit reports, which is provided by creditors.And not all creditors behave the same. For example, many creditors don’t report missed payments until they become at least 30 days late. Others may wait even longer, if they even report at all.
How long those blemishes remain on your credit reportcan also vary: Negative items generally stay on a credit report for seven years, but can remain for up to 10 years in the case of bankruptcies. Meanwhile, you can expect on-time credit card payments to appear, but payment information from other businesses, such as utility companies, isn’t necessarily listed on credit reports or included in your FICO score.
If you’re an authorized user on someone’s credit card, things can get tricky, too. While the payment history for a shared account can impact an authorized user’s FICO score, one of the bureaus (Experian) only includes positive information on the authorized user’s credit report, while the other two bureaus include both positive and negative data. And authorized users can even remove part of their histories if things go wrong with the authorized account — all they have to do is ask to removed from the card account, and over time, that card’s history will vanish from their payment history. Account holders, and even co-signers, don’t have that luxury.
Tips for a good credit history
Building a strong payment history is not only about what you do right, but also about what you do wrong. To get a great score, you’ll need to make consistent, on-time payments while simultaneously avoiding mistakes that cost you FICO points. What happens if you mess up your credit? Expect a 30-day late mortgage payment, for example, to drop your FICO score by as much as 110 points. After a mortgage delinquency occurs, expect to wait three years before your credit score fully recovers.
Experts tell you if you have a few accounts that are delinquent, it’s going to hurt you a little. But if you’ve got a lot of delinquents, it’s going to hurt you a lot.
Mistakes can take years before they disappear entirely. Typically, negative items, such as missed payments, will remain on your credit reports for up to seven years.
That’s why it’s very important to be cautious about your payment history.
Adapted from Credit Card News