Credit-building help and advice for renters

The case for renting, rather than owning, your home has rarely been stronger in America. In most parts of the country, rental payments are lower than monthly mortgage costs. Renting also provides the financial freedom and ability to relocate prized by job hunters who may need the flexibility to go where the jobs are.

Yet one downside of renting has always been that leasing doesn't build your credit the way owning can.

In this credit-constrained economy, having insufficient credit history can hinder your ability to obtain credit or increase your cost of borrowing as much as having a bad credit history might. Having little or no credit history may not be scoreable by traditional credit scores, which often prevents the applicant from receiving several types of credit, including cell phones and credit cards.

Building credit is becoming easier for renters, however, thanks to new developments in the credit world. Your rental history information may now be factored into certain credit scores such as VantageScore.

Your good rental history now counts

Nearly 96 million renters, most of whom pay their rent on time, are not getting the credit they deserve based on their credit reports, according to the National Multi Housing Council. The three national credit bureaus historically factored only negative rental data into an individual's credit report or score, such as evictions and charge offs. Now, Experian has begun factoring positive rental history data into consumer credit scores, thanks to its acquisition of RentBureau, the largest and most widely used credit bureau for the multifamily industry.

This means that positive information that was previously only available to, and used by those in the rental industry, is now factored into credit reports and credit scores for lenders of all types, including auto lenders and mortgage companies. On-time rental payments and your history as a good-paying tenant can now positively affect your credit score.

The data can be helpful to homeowners who may have gone through a foreclosure and need to rebuild their credit while renting. It will also help property owners conduct more effective screenings of potential tenants as past rental behavior is the best indicator for how an apartment applicant is likely to pay rent in the future.

The basics still work

Beyond making sure you pay your rent on time every month, you can rely on tried-and-true methods for building credit, including:

* Pay all bills on time, from credit cards to utilities.

* Establish utilities or cell phone service in your own name, rather than a parent, spouse or friend. In some areas of the country, those new accounts may be reported to the credit bureaus and could factor into your score and report. Conversely, if you fail to pay, no matter where you live the bill will almost certainly be turned over to a collection agency and will negatively affect your credit.

* Obtain a credit card and use it wisely. Simply having an inactive card is not enough to build credit. Credit scores will look at how often you use the card, how much of the balance you pay and if you pay on time. Making small, affordable charges and paying them in full each month can help build your score.

* Have more than one line of credit. One credit card alone isn't likely to do much for your score. Consumers who have fewer than three types of credit on their reports are likely to have lower scores.

* Pay attention to your debt-to-available-credit ratio. Maxing out your credit cards is damaging to your credit scores. It's best to keep your balances as low as possible. Having no more than $5,000 in debt when you have available credit of more than $20,000 will have a less negative impact on your score than maxing out your credit cards.