Can Leasing an Apartment Raise Your Credit Score?

by Leigh Thompson, Demand Media
    You need credit to build credit.

    You need credit to build credit.

    When your wedding bells chimed, you pictured a future filled with white picket fences and financial security. A limited or bad credit score undermines this dream with an increase in interest rates, denial of credit and increase in insurance premiums. When you increase your credit score, you open doors to higher levels of credit such as lower mortgage loan rates -- in some cases approval -- and credit cards. Leasing an apartment has benefits but those do not include a positive effect on your credit.

    Your Credit Score

    Your credit score is made up of five key aspects of your credit report: your payment history, your types of credit, the amount owed, the length of your credit history and new credit. Only by obtaining credit and properly managing those accounts can you increase your credit score.

    Rent & Utilities

    Your apartment lease, water, electricity, cable and insurance bills are not credit accounts. In turn, these types of bills do not routinely report on your credit report or raise your credit score. You need actual credit accounts -- where a creditor loans you money and you pay it back over time.

    Negative Entries

    While leasing an apartment doesn't raise your credit score, breaking a lease sure can drop it. Leases are legal contracts between you and your apartment manager. Failing to abide by the terms of your contract often results in eviction and collection efforts to recover the money. Collection accounts and judgments appear on your credit report as negative or adverse accounts. Adverse accounts significantly drop your credit score. Collection entries and judgments stay on your credit report for seven years -- whether you pay it or not.

    References

    Your apartment lease may not help your credit situation but you can use your landlord as a reference. A good history of on-time payments establishes goodwill with your landlord. If you need a reference about your ability to pay your bills on time, your landlord may write a letter to assist you in your efforts.

    Exception

    Experian -- one of the three credit reporting bureaus -- purchased a company called RentBureau in 2011, which records rent payments to your credit report. Reporting rent payments to RentBureau could raise your Experian VantageScore, which is only one of your three credit scores. Your apartment manager or landlord must be willing to send your payment records in to RentBureau to add it to your Experian credit report.

    About the Author

    Leigh Thompson began writing in 2007 and specializes in creating content for websites. She has been published online in various capacities. Thompson has an associate degree in information technology from the University of Kansas and is working on a bachelor's degree in business and personal finance.

    Photo Credits

    • Hemera Technologies/AbleStock.com/Getty Images