3 Ways A Sale-Leaseback Might Improve Your Credit Score

Your credit score is a key part of your financial identity. A good score can open doors, while a bad one can limit your options. Poor credit scores can make it hard to get a loan, rent a home, or secure a job, worsening your overall stress.

Luckily, new solutions are surfacing that allow people to leverage their homes to improve their credit scores. One solution is a home sale-leaseback– when a homeowner sells his or her home and then leases it back for a monthly rental rate. But can a sale-leaseback potentially improve your credit score?‍

Credit Score Improvement: What Matters?

Before diving into the question, it’s worth understanding the strategies people typically use to improve their credit score. The most effective strategy is to pay your bills on time followed by keeping your credit utilization rate low. Experts suggest maintaining a utilization rate of around 10%. Paying off major debt - like  a loan or a mortgage can also help. Last, getting a secured credit card, becoming an authorized user on a family member’s card, and disputing credit errors are some other well-known ways to boost your credit score.

The Role a Sale-Leaseback Could Play

Now let’s examine why homeowners should consider adding a home sale-leaseback to the list of typical credit score improvement strategies.

#1 Reducing Debt

In a home sale-leaseback transaction, you sell your home at a competitive price and receive the money upfront, just like a typical home sale​. The lump sum you receive from the sale of your home can be strategically used to tackle high-interest debts like credit card balances. By reducing these liabilities, you lower your credit utilization ratio, a key component of your credit score calculation. This not only lessens immediate financial pressures but also sets the stage for a healthier credit profile in the future.‍

#2 Stable Payments‍

As you transition from a homeowner to a renter, you gain the advantage of predictable monthly payments. This makes it easier to budget and ensure regular, on-time payments, which are reported to credit bureaus and help build a strong payment history. Over time, this stability can lead to a gradual increase in your credit score, as bill payment history is a critical factor in its calculation.‍

#3 Avoiding Additional Debt‍

Opting for a sale-leaseback instead of a reverse mortgage or refinancing helps you sidestep additional debts. This helps you protect your credit score from potential negative impacts like the risk of default associated with additional borrowing.

The Final Word from Truehold 

A sale-leaseback can provide the perfect opportunity to leverage your homeownership to improve your financial health. Doing so can be a meaningful step towards healthier credit. If you’re a homeowner who’s looking to improve your credit score - and cash out your equity simultaneously - Truehold’s sale-leaseback just might be right for you.

Contact us today and get started with one of our trusted advisors.