Does Using Rent-to-Owns Help Build up Your Credit?

Rent-to-own arrangements can provide an opportunity for you to use an item prior to full payment and in many cases end your month-to-month rental agreement. Not to be misunderstood with a lease, such as an auto lease or a home that offers a lease with the option to buy, many rent-to-own plans can end at any time. Typically, your agreement ends when you return an item or if you stop making your required payments. Rent-to-own agreements that you fulfill might be instrumental toward building your credit. Most rental-to-own providers do not report to the credit bureaus. However, you may have opportunities to receive credit reference for your rent-to-own payment plan.

Qualifying

Qualifying for an item that offers an opportunity to gain ownership at the conclusion of your rental term may not be too difficult. Many companies and individuals who provide rent-to-own options are typically aware of certain risks, as there are other options such as payment in full or credit approved transactions. To qualify for some rent-to-own items, you will need to provide proof of employment, personal references, your home address and your phone number. After your information is verified, you may need to make a deposit or a payment for your first month's rental. When using a rent-to-own program, most offers are not based on your credit qualifications.

Agreement

An agreement will serve as the understood terms between you and the person or company from whom you rent. You should never enter a rent-to-own agreement on a handshake or a verbal understanding. Because a lapse in memory could cause a dispute for either party, and in many cases you may have minimal proof should a legal proceeding occur. Ensure that you obtain a written agreement prior to the commencement of your rent-to-own plan. Your agreement should reflect your ownership of the rental item after you have satisfied the proposed requirements. Safeguard the agreement in case you need to reference the document in the future.

Terms

The terms of your rent-to-own agreement should reflect the rental item and the duration of your rental term, as well as the amount and frequency of your rental payment. The term for rent-to-own items typically depends on the item's cost, as an inexpensive clock radio will take a shorter time to pay for when compared to a large-screen television. Many rent-to-own agreements are short-term and typically last from a few months to a few years.

Considerations

If you are considering a rent-to-own arrangement to acquire an item that you are not able to pay for upfront, ensure that you understand the terms. You should also shop among other merchants or individuals who offer the item that you want to rent. Because pricing can vary, it's a good idea to comparison-shop for the lowest combination of rental payments and total ownership costs for the item. While shopping, you should inquire about internal procedures for providing credit references, for customers who pay as agreed.