You don't need to have perfect credit
While good credit will help you secure the rent to own option, you don't need to have a perfect credit. If you did, you most likely wouldn't be considering rent to own. What is important is that you have a path to improve your credit score. For example, if you had a chapter 13 bankruptcy 5 years ago, you can expect to see it be removed in 2 years. Rather than waiting 2 more years to start your home ownership, you can consider rent to own today with plans to transition to traditional mortgage financing in 2-3 years.
Time to start improving your credit
If you sign on to a 5-year rent to own agreement, your 5-year clock starts ticking. In this 5 year period, you'd need to (i) get your credit to the level that will qualify for traditional mortgage, and (ii) save enough money for a down-payment. You don't want to miss this time period (5 years in this example), because if you do, the premium you will have paid compared to rental will have been wasted. So, have a solid plan in place to get your credit and down-payment ready in time.
Credit Improvement Options
How you improve your credit score depends on what your credit score is. If you need more history or a slight boost, you can do the following:
- Maintain low balance on credit cards
- Increase credit card limit to highest level without the card issuer checking your credit
- Pay bills on time
- If you have any payment in collection, contact them and settle the account with a condition of their removing the negative item
- Don't close any accounts that are older and in good standing. Let them age.
- Don't apply for new credit
Once you have a plan for credit improvement, it's time to find a rent to own home that's right for you.