Rent and Leases

[Cassandra]

At the beginning of the school year I moved in with my grandma and a few of her friends. They're renting a nice house. I was not put onto the lease for the house.

My grandma and I have been thinking about renting our own place together for a few weeks now and we found a great condo in the same complex as my parent's. We would be renting the condo because right now my grandma does not have enough for a down payment. Apparently what they'll do is take like 20% of the monthly rent and put that towards a down payment for the condo and once there is enough for a down payment, she can buy the condo. (I hope I explained this well enough. My grandma explained it to me so I might have missed something.)

My grandma went down a few days ago and applied for the lease (I think). To be honest, I'm not sure what she had to apply for. This Thrusday I have to go down and apply myself because I'm 18 and will be living there for at least a few years. Again, not sure what I'm applying for exactly. This will be the first time that I will be put on a lease.

I will be paying rent.

Onto my questions:

1. I know that your rent affects your credit score. If you're late, miss a payment, etc. But how does it work when more than one person is on the lease? What if I pay my part of the rent on time but the other person doesn't, will my score be affected negatively?

2. And for a very broad question: how do leases work? I've never entered into a lease, or any sort of contract for that matter, and I would like to be semi-prepared for this.

I wasn't sure what to search for, so if there is already a thread on something similar, my apologies!

Cassandra

[humandraydel]

1. Every person on the lease can be held fully responsible for the entire amount of the lease. So if one person doesn't pay, it can hurt the other person's credit.

2. A lease is just a promise from you that you will live in the condo for the next year (if it's a year lease). The lease will also spell out penalties if you try to break the lease. Usually the penalties are harsh enough that it doesn't make sense to break a lease unless you have to. Penalties such as payment of 3 months rent.

[project15]

Sometimes, if you're renting from an individual rather than a company, the individual won't report your rent to credit companies unless you start missing payments. This means that if you pay on time it won't help your credit score at all, but can hurt it if you start missing payments.

[Hypersion]

Renting isn't credit so it will only appear on your credit report if you don't pay. (your landlord becomes your creditor.)

[Hypersion]

"Apparently what they'll do is take like 20% of the monthly rent and put that towards a down payment for the condo and once there is enough for a down payment, she can buy the condo."

I think it would be better to just pay the 80% and save the 20% yourself so you get a return from investing the 20% and you are also not locked into buyer the condo if you decide you don't want it.

[loanstar]

if you sign the contract as two separate entities then it wouldn't affect your credit rating if the other entity doesn't pay their bit. Also some landlords (individuals) do not report to credit reference agencies.
If you're worried about your credit rating, you can ask to sign separately from your Grandma..

[Cassandra]

Thanks everyone for your replies.

I would like to clarify that I completely trust my Grandma to pay her portion of the rent in full and on time every month. I was merely curious as to how paying your rent could affect your credit score.

I didn't know that your landlord didn't have to report your rent unless you were behind. Doesn't seem that fair.

Thanks again for your help!

Cassandra