$0 on rent/mortgage in credit card application or a made-up number?
August 3, 2017 3:03 PM   Subscribe

Is it better to say you spend $0 per month on rent or mortgage in a credit card application, or use a made-up number, if you don't technically have either expense (but have an mostly-equivalent expense)?

I need to apply for a new credit card, and I'm a little bit squirrelly about it, because I was rejected for a credit card when I first moved back to the US last year (due to a thin file) and had to get a secured credit card instead. The secured credit card isn't improving my credit score as much as I'd hoped, mainly because the percent utilization is on occasion fairly high (although I pay off the full amount every month). My FICO score is around 738, and my score through NerdWallet (which I think is TransUnion?) is around 720.

I live with my parents, so I don't have either a monthly rent or mortgage expense. (I do pay money to my parents for various things, but it's not technically rent and we don't have any kind of rental agreement.) Should I put $0 as my monthly rent/mortgage expense in my credit card application, or the average amount I pay per month to my parents for various living expenses? I am absolutely not interested in putting anything fraudulent in my application, but this feels like an edge case to me, and I'm not sure which option is better for the purposes of actually obtaining the card.

Thank you!
posted by anonymous to Work & Money (12 answers total)
Is the money you pay to your parents a condition of them welcoming you to live there? If so, that to me is rent. Money is fungible. What they use if for is irrelevant.
posted by AugustWest at 3:41 PM on August 3, 2017 [3 favorites]

I've been approved for credit cards when I did not have a housing payment so if you're wondering if it would be a red flag, probably not. They just want to get a clear picture of your basic finances.
posted by rabbitrabbit at 3:57 PM on August 3, 2017 [2 favorites]

If your parents are in good financial health and you trust them and they trust you, ask them if they'll add you as an authorized user on one or more of their cards. You don't even actually have to use the card ever, but being able to share their credit history will help your score and help you establish your own credit history so you can build yours faster.
posted by phunniemee at 4:40 PM on August 3, 2017

First of all, 738 is a Very Good score. No one - literally no one - has ever achieved an 850 score, and only a rare few achieve 800. 738 will get you a nice rate on a home mortgage.

Second - being an authorized user does nothing for your credit score, since you are not responsible for paying the bill. The only score that affects is your parent's score, if you don't pay them for your purchases and they can't afford to pay the credit card bill.

The secured card will have "thickened your file" enough for you to qualify for a non-secured card at this point, if you have used the card and paid it off regularly. CC companies want to see history.

The reason CC applications ask for your monthly housing payment is so they can see your debt to income ratio. They don't want your housing cost to be any more than 50%, and they'd prefer it be closer to 33%. You'd think that'd make you golden, right? Except that the cool thing about landlords is they are another creditor showing that you have a history of paying your debts on time.

Applying for a credit card dings your credit history, but it's a relatively small ding and doing it every year or two won't hurt you.
posted by ohbejoyful at 5:19 PM on August 3, 2017 [7 favorites]

First of all; your credit score is completely fine and it would be difficult to raise it any more than you already have because the major thing holding it down is the length of time you've had an account open. All you can really do is wait and continue to pay the full amount every month.

You can put zero but like others have said, the number won't make any difference unless the number you put is so absurdly high in comparison to your income that it causes the system to flag you.

I think you're definitely overthinking this! You can definitely get a normal credit card now that you have a few months of great credit history-- frankly you could get a card even with a few months of "bad" history. For these automated systems, bad history is much better than zero history. Also, FWIW, you probably could've gotten a regular card to begin with if you had visited your bank in person (or your parents' bank, with your parents); that's what I did when I had the same exact problem a few years ago. This is not to criticize your choice, but to emphasize how very much not a problem this is.
posted by acidic at 5:37 PM on August 3, 2017 [3 favorites]

I don't think reporting 0 will throw off too many red flags - it's not unheard of at all. People live with their parents, have paid off mortgages, live in a college dorm, etc. that wouldn't fall directly under the realm of 'monthly housing' expense. If it's not a super-prime card you're applying for, I wouldn't worry too much about it. I would go ahead and report it as your average you pay to your parents if that is less than 20-30% of your income, otherwise leave it 0. You'll be fine. 738 isn't terrible at all.

One thing you noted, as an aside, was that you pay your card off every month but your utilization remains high. Consider, if you haven't already, determining when your CC issuer reports your balance to the CRAs, and make it a point to pay your bill a few days in advance of that date so that they report a zero or very small balance. This will help your utilization without costing you any money or changing what you do, just when you do it, and may very well result in a healthy boost to your score. At one point in my own credit fixing, I went from nearly 90% utilization to less than 5 in one reporting period. My scores went up on average nearly 100 points from that alone.
posted by SquidLips at 5:44 PM on August 3, 2017 [1 favorite]

As far as I can tell, the utilisation number seems to affect your score for as long as the utilisation lasts. It doesn't have any lasting effect when you pay it down. If it worries you, pay your card off (slightly early if necessary) a few days before you get a credit check and keep the balances sub-10% until it appears on your record. But honestly your score easily up to what you're trying to do with it.

When you get a new card, apply for one that has a sensible deal first (not the top-of-the-market stuff necessarily, but simple things like no fee and a cashback deal). The single credit check on your report if you don't get that card will cost you only a small handful of points (less than 5), and will still leave you in a good position for a second application if required.
posted by How much is that froggie in the window at 5:44 PM on August 3, 2017

Adding to the chorus. You have a pretty good score! I'm wondering why you thought that putting a higher number for rent might help you. Specifically, I'm wondering if you thought the credit bureaus might collect that information and add it to their mystery list of debts you have owed and paid. They won't, they get that data from your creditors who are reporting what you've actually paid, not from anything you claim to have paid in an application. Presumably your parents are not reporting their income from you anywhere. And as far as the CC company itself is concerned, they want to see how your income compares to your expenditures. So smaller is better. Besides, the way you describe it ("I do pay money to my parents for various things," "various living expenses," and particularly the fact that you mention it varies month to month) it sounds more like you are covering your share of the utilities and groceries and other things like that. If you are paying them for things that are not rent, don't report it as paying rent.
posted by solotoro at 6:19 PM on August 3, 2017

Except that the cool thing about landlords is they are another creditor showing that you have a history of paying your debts on time.

Landlords don't become creditors unless you don't pay them, and they also don't generally report monthly payments to the CRAs.
posted by praemunire at 6:30 PM on August 3, 2017 [1 favorite]

Back when I was trying to figure this out, I found some blog post where the guy tested his credit score and found that the best utilization was around 10%. So if you do what SquidLips suggests (which I think might be pretty hard to do, determining the specific day they report) I wouldn't pay it off 100% at that time.
posted by salvia at 9:22 PM on August 3, 2017

Yeah, just for some perspective on that score, our mortgage broker called our credit "perfect" - we each had 803.
posted by kitcat at 2:15 PM on August 4, 2017

"mainly because the percent utilization is on occasion fairly high" utilization is calculated every month and previous months aren't considered.
posted by Amanda B at 4:25 PM on August 4, 2017

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