5 Money Moves to Make Even If You Don't Plan to Buy a House


You know that owning a home and making a mortgage payment each month is a big financial commitment. You know, too, that having a solid credit score is a must if you want to be approved for that mortgage loan.

But what if you never plan on owning a home? What if you plan on renting forever? You don't need to worry about maintaining strong credit and building a high credit score, right? Wrong. Even if you never plan on making the jump from renting to owning, there are still several money moves you need to make to ensure a happy financial future.

1. Pay your bills on time each month

Paying a credit card bill 30 days or more past due will send your credit score tumbling by 100 points or more. You might not think that matters if you never plan on taking out a mortgage and buying a home. But it does.

Other lenders rely on your credit score to determine how likely it is that you'll make your monthly payments. They also use that score to determine how high of an interest rate to charge you if they do approve you for a loan.

This means that lenders will look at your credit score when you apply for a loan to buy a car. They'll look at it if you need to take out a personal loan. And when you're applying for credit cards, you'll need strong credit to qualify for cards with the best rewards programs and interest rates. (See also: Pay These 6 Bills First When Money Is Tight)

2. Keep your credit card debt low

Consumers applying for mortgages know that having too much credit card debt can hurt their application. But even if you're not planning to own a home, it makes good financial sense not to carry a balance on your cards each month.

Credit card debt comes with high interest rates. If you don't pay off your balance at the end of each billing period, credit card debt can grow quickly. If you're not careful, those minimum monthly payments can become a huge financial burden.

High amounts of credit card debt can also lower your credit score. Only charge what you can afford to pay off in full when your credit card bill comes due. And if you do have outstanding credit card debt, use whatever extra money you have each month to pay it down. (See also: The Fastest Method to Eliminate Credit Card Debt)

3. Show landlords how financially responsible you are

You might think it doesn't matter that you missed two auto loan payments or that you skipped over a medical bill that's now in collections. But even if you don't need to prove to mortgage lenders that you're a good financial risk, you will need to prove it to apartment landlords. You have to live somewhere, right?

When you apply for an apartment, the odds are high that your landlord will run a credit check to determine if you're likely to pay your rent on time each month. You'll have to consent to have such a check performed. If you refuse, don't bet on getting that apartment.

The credit check will show negative financial moves such as late payments on recurring loans and credit cards, accounts that are in collections, car repossessions, and recent bankruptcies. It will also show how much you owe on your credit cards and other loans. You'll need to pay your bills on time, keep debts out of collections, and keep your debt levels low if you expect to qualify for the better apartments in your city. (See also: 10 Questions Landlords Can't Ask)

4. Build an emergency fund

Homeowners know how important an emergency fund is. They draw on these funds to cover such unexpected emergencies as a burst water heater, dying furnace, or leaky roof. By having money saved in such a fund, they can cover these home repairs without resorting to putting the costs on their credit cards.

But you should build your own emergency fund even if you never plan on owning. Even without a home, you will face big and unexpected bills. What if your car's transmission goes out? What if you lose your job? If you don't have an emergency fund of cash savings, how will you pay for these charges without running up credit card debt?

Experts recommend saving six to 12 months' worth of daily living expenses in an emergency fund. That might sound intimidating, but if you take it slowly by depositing whatever you can — even if it's only $100 a month — you can gradually build up a significant emergency fund. (See also: 5-Minute Finance: Start an Emergency Fund)

5. Save for retirement

Retirement is closer than you think. You need to steadily save for the days when you'll no longer be working. This is especially important if you never plan to own a home. Homeowners often receive a nice chunk of cash when they sell their homes and downsize to a smaller residence. If you plan on renting forever, you won't have that opportunity.

Instead, you need to start saving for retirement as soon as you begin working. If your company offers a 401(k) plan, sign up. Explore other retirement options such as IRAs, too. (See also: 5 Retirement Accounts You Don't Need a Ton of Money to Open)

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