Are Rent to Own Purchases a Credit Fix?

May 7th 2016

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You have no credit and you need to purchase a new washer, refrigerator or stove. Rent to own sounds nice because the seller doesn't check your credit. Even better, some rent to own stores are quick to tell you that purchasingrent to own items will help your credit. Before you sign up for a high-interest loan thinking that it is the answer to all of your problems, learn a little more about this quick credit fix.

A Quick Credit Fix or a Let Down?

Many stores that allow consumers to rent furniture or televisions may or may not report to the credit bureau. So, it is important to ask the store how, when, and if they report to a credit bureau before you make any purchase.

Why Rent to Own Isn't a Good Idea

Even ifrent to own stores do report to credit bureaus, the purchase may not help your credit rating. These stores charge high interest rates that can almost double the purchase price of whatever you are buying. If the store does report your loan to credit bureaus, you will have a large debt on your rating until you pay it off. Only then will the purchase actually help your credit, other than reflecting that you make your payments on time each month. If you fail to make payments on time, that will be yet another black mark on your credit rating.

A Credit Fix that Works

So, if you can't raise your credit score using rent to own purchases, what are some good credit fixes? The National Foundation for Credit Counseling offers these tips for raising your credit score:

  • Don’t have too much debt. Having a lot of debt through credit cards, loans and rent to own programs looks bad when a credit check is made.  
  • While having a lot of debt is bad, having a variety of different credit accounts is good. It is best to have a revolving type      of credit, like a credit card, and a fixed loan, like a car or house loan.      Just make sure you pay your bills on time and pay off your credit card      every month. Having a lot of credit and only a little debt is key.
  • Try piggybacking your      accounts.  This is a way to build a credit      history by authorizing someone else on      your credit account.  For example, adding      a parent or spouse to a credit card account can boost your credit score if that person has good credit.
  • Get a cosigner. If you have no credit at all, getting a cosigner to help you      get a loan is a smart idea. The cosigner is someone who signs a loan      contract along with you to guarantee that the loan will be paid. The only problem with this is if      you don't pay off the loan, your cosigner is legally responsible for it.
  • Getting a secured      credit card is another option for those with poor or nonexistent credit. To get this type of credit card      you must deposit a certain amount of money, as required by your financial institution. These work like debit cards, but often      have annual fees and other charges, so make sure to read the fine print      before signing up.
  • Get a small personal      loan from a credit union or bank to establish your credit. The financial      institution may ask you to deposit a certain amount of money into an      account first, so you may want to ask.

While rent to own may not be the best idea for boosting your credit, there are a lot of ways to build credit without going into a lot of debt. Use these tips and you will be able to see your score go up in less than a year.


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