Vail Daily column: New service could help renters become homeowners
As everyone who has ever applied for a mortgage quickly finds out, a suitable credit history and credit score is critical to getting a loan approval. There are three main components to getting approved: credit, income and down payment.
Most first-time homebuyers might be a little light in the credit history department because rental payment history generally does not factor into a credit score. The reason is that the three major credit bureaus have minimum requirements for those who report credit to them; generally a creditor must have several thousand accounts to be eligible to submit payment histories, and only a few landlords in the nation would have that many tenants.
But there is a very cool new service out there in cyberspace that aims to change all that. It is called http://www.renttrack.com It allows landlords with as few as 20 properties to sign up and offer their tenants the ability to pay their rents online and Rent Track then records the payment history, remits the money to the landlord and reports the rental history to the three major bureaus.
Recent studies by the company show that an individual with a 650 FICO score might see an increase of 29 points after six months of paying rent on time via Rent Track. The charge to renters is reported to be $1.99 per month.
In addition renters have the option of paying their rent with a credit or debit card or online ACH withdrawal. They can also set up automatic payments, and can change the source of payment if needed. This could allow some major airline mileage points to rack up or other rewards.
In addition, part of credit scoring now involves looking at the amount of your card you pay off every month. If you pay more than your minimum payment, then you get kudos from the scoring model. So, if a tenant used his airline credit card for an automatic payment on the first of every month and then set up an auto pay on the credit card on payday, he can get airline miles, improve his credit score by paying a larger than minimum payment on the card and get a double helping of good karma on his credit score, as he is adding an additional trade line to his credit report from Rent Track.
Locally, this could help a lot of locals squeeze through offseason when the paycheck is not as regular by being able to pay the rent on a credit card. This could also be a great service for parents with college-age kids who are paying their rent. The parents get the airline miles and the kids could get the credit history.
I have no idea if any property management companies in Eagle County are taking advantage of this new program, and it does require their participation first. If you are a tenant and want to build your credit history and have the advantages of this program, then it might be a good idea to inquire with your property manager to find out if he or she is aware of this program.
This program could also create a strong sense of paying the rent on time as a priority in life and reduce delinquency issues for landlords.
This is one of those “why didn’t I think of it” ideas in which I wish I owned some stock. I think this little company has a great concept and could really help a lot of renters out there. Of course, there are some landlords who would prefer their tenants who do pay the rent on time every month not ever move out, but hopefully most will see the overall good to this program.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.
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