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Rent-to-Own Won't Help Your Credit Score

Written by: Kristy Welsh

Last Updated: September 25, 2017

When you have bad credit and a low credit score, making big purchases can be a challenge, if not down-right impossible. After all, if using a credit card isn't an option, all you're left with is paying cash, and coming up with hundreds, or thousands, of dollars up-front can be tough for just about anyone. Thus, the appeal of rent-to-own, a temptation to be avoided in just about any circumstance.

What is Meant By Rent-to-Own?

Rent-to-own most commonly refers to an agreement in which a consumer rents merchandise, with the option to buy, from a rent-to-own store that carries merchandise ranging from furniture, to electronics, to appliances. Payments that include high interest rates are made on a weekly, bi-weekly or monthly basis.

Do You Need Good Credit to Qualify For Rent-to-Own?

No, rent-to-own stores do not check credit reports or credit scores, which is what makes them so attractive to those with bad credit histories. Unfortunately, those with bad credit are often already deep in debt. So the last thing they need to do is pay an average of 2 to 3 times more for rent-to-own purchases than if they were to buy the same items at regular retail price. Yet that is precisely what millions of us do. According to a report that includes 2014 statistics from U.S., Mexico, and Canada, there are more than 4.8 million rent-to-own customers, taking in $8.5 billion a year business, supporting as many as 9,000 rent-to-own stores.

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Are Consumers Who Enter Into Rent-to-Own Agreements Obligated to Pay?

No, consumers may simply rent the merchandise and return it at any time. Of course, this does not include any form of reimbursement, as all payments made up to the point of return have been made in exchange for the rental period. On the other hand, the merchandise automatically transfers ownership to the consumer once a certain number of payments have been made. In fact, 70 percent of rent-to-own customers do end up making all of the required payments in order to own the merchandise. That's an awful lot of people paying 2 to 3 times more than if they'd been able to purchase at regular retail price.

Will Timely Payments Help Your Credit?

Here is the sad part, no it won't. Rent-to-own stores do not report to the credit bureaus. Avoid doing business with any store that claims otherwise, as rent-to-own salespeople have been known to stretch the truth on this point.

What if You Stop Making Rent-to-Own Payments?

If payments are late or missed, the rent-to-own store may repossess the rented items.

Can Late Payments or Merchandise Repossessions Hurt Your Credit?

No, as rent-to-own stores do not report to credit bureaus. But even this isn't much of a silver lining considering that loss of the merchandise means loss of all the money already put toward its purchase.

Pros and Cons of a Rent-to-Own Agreement

As with anything, there are always pros and cons to a given situation. We have come up with a few good reasons to go the rent-to-own route and then there are some bad reasons.



So, the bottom line when deciding whether or not to use a rent-to-own store for furniture or appliances, make sure to weigh the pros and cons and make your decision based on your current financial situation and needs. If you can live without that big screen TV until you save up some money, that would be a wiser decision than paying five times more for a TV that will be outdated by next year. Make smart purchases that will benefit you in the long run.

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