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Landlords and property management companies often carry out credit checks on applicants for rent. Credit checks are usually part of a larger process of background-checking potential renters. This is one of the various challenges faced by people with bad credit.
Ways you can rent with bad credit
Those with bad credit should create a multi-faceted plan for this challenge. The aim should be to find landlords who do not carry out credit checks.
Being prepared with paperwork could help counteract your bad credit. For example, a verifiable income, references, additional advance payments and more.
First, let's define what a good or bad credit score is using the table below.
FICO score ranges
|800 or more||Excellent|
|740 bis 799||Very good|
|670 bis 739||Gut|
|580 bis 669||Just|
|300 bis 579||Arm|
Look for landlords who don't do credit checks
Today's connected online environment makes data easier to access than ever before. This includes a landlord's ability to screen applicants prior to leasing rental units. Tenant screening companies create reports for landlords that usually include credit checks.
The top three consumer credit bureaus are Equifax, Experian, and TransUnion. Each of the offices now sponsors landlord and property manager verification services. For example SmartMove from TransUniongenerateda credit, crime, and eviction history.
Experianexplainedthat a FICO score of 620 is a common "starting point" for landlords. Therefore, individuals with a credit score below this number should seek housing options with no credit check requirements.
Some of these qualities may be less desirable. The National Association of Real Estate Agentsestimatesthat "granny and pop" landlords own 42% of rental properties. Most of these properties consist of one to four residential units.
Search for rentals that have been featured on Facebook Marketplace, Craigslist and local newspapers. You can also ask family members, friends, and others in your social network for suggestions.
Show proof of salary to make up for low credit
It might be helpful to show a landlord that you have the financial means to pay the rent. Provide proof of your current employment and income.
Also, consider collecting payslips for the past few months, which indicates job stability.
Have you made any other verifiable regular monthly payments? Add bank statements from the last few months. Bank statements can also provide another means of demonstrating financial stability.
Positive references from previous landlords
Do you have a current or previous landlord that could serve as a reference? Having someone to vouch for you is often a powerful way to show credibility.
Always ask your landlord or property manager before providing their name and contact information. They can even write a letter of recommendation for you.
A previous landlord or property manager may have a helpful payment history report. Your bank statements from the same period can further assist in verification.
Arriving prepared with these types of documents can improve landlord perceptions.
Pay a larger deposit
We know the expression “money speaks”. The main reason landlords conduct credit checks is to reduce their risk.
Data suggests that the behavior of people in the past is often a good indicator of what is to come. Those with a good credit history are less likely to default on their lease.
One way to approach a landlord is to reduce their financial risk. Here they offer more upfront payment in the form of a larger deposit.
Lease agreements often require the first month's rent and a security deposit upfront. This refundable deposit is often equal to one month's rent.
Consider offering a larger deposit. For example, if the monthly rent and security deposit is $800, you might offer a security deposit of $1,000. Assuming you don't cause excessive damage to the unit, you should be able to get your deposit back.
Another option is to pay a few months' rent in advance.
Explain your reason for bad credit history
Those with bad credit are usually negativeThe trade lineon their credit history. Examples may include multiple late payments, a debt collection account, eviction, or bankruptcy.
Good people sometimes have financial problems that cause them to fail to meet their financial obligations. What ended up being a financial disaster was often due to unforeseen circumstances.
For example, you may have experienced an unexpected job loss. Other examples could be a major health problem, a death in the family, or a divorce.
Before you tackle your credit problems, remember the importance of checking your credit report. Checking your credit history gives you the same perspective as a landlord.
You may find that older, negative entries have lost your credit history. With the exception of Chapter 7 bankruptcy, themajorityAdverse credit accounts only stay on your report for seven years.
During this review of your credit report, you may also find possible errors. The Federal Trade Commissionfoundthat about one in five finds errors. Disputing mistakes or errors can also benefit your credit score.
It might help to be open and honest with potential landlords about past loan defaults. These appeals are probably most effective when explained in person. However, a written statement may be required if a face-to-face meeting is not possible.
Emphasize your commitment to improving your credit score and adopting sound budgeting strategies. Keep in mind that this approach is most effective with individual landlords. A large property management company will likely be less open-minded and more inflexible.
Find a roommate
How about a roommate? Having a co-tenant in a budget rental unit could improve overall affordability.
Finding a roommate with good credit can help you avoid further landlord rejections. Consider a larger rental unit with an additional bedroom so you have plenty of space.
Have your "future" roommate fill out the leasing application and simply split the rent. Another option is to find someone with an existing lease who is looking for a roommate.
Maybe you have a friend or relative who recently bought a house and has a lot of extra space? Here you could rent a room and help with expenses.
Another option is to find a co-signer, generally a family member or close friend with good credit. This person acts as a rent guarantor for the rent.
Finding a co-signer can prove difficult as this person takes on the financial responsibility.
Set up automatic rent payment
Offering to set up automatic monthly rent payments might help convince a potential landlord. Consider using this option in conjunction with another strategy.
Here the rental payments are sent automatically according to an autopay schedule. The transfer is made electronically from your checking account, like a direct deposit.
There are several tools for setting up an automatic payment, and many of them are free. Some of these companies tooreport rentand enable credit card transactions such as Avail, Stessa, and Rentler.
Remember that you need to make sure you have enough available funds in your checking account each month before making an automatic payment.
Emphasize that you are a clean, law-abiding tenant
Most people know the saying “You never get a second chance to make a first impression”. Keep this in mind when speaking and meeting with a landlord or property manager.
Wearing nice clothes, being on time, and making eye contact helps. Like it or not, people form perceptions and make assumptions about you.
Project an image of a friendly, clean, and responsible person. This could help you clear the credit hurdle.
During these discussions, ask the landlord or property manager if there are any tasks you could help with.
Maybe you could lower the monthly rent and make their life easier by getting some work done? For example, seasonal gardening or cleaning laundry rooms or other shared spaces.
Tenant applicants with poor credit should understand their rights regarding tenant screening reports. If a rental is declined due to a background screen, renters can access the report. The landlord has toofferyou with the name of the screening company so you can get a copy.
frequently asked Questions
What is the lowest credit rating a landlord will accept?
There is no fixed “minimum creditworthiness” for renting an apartment. Landlords check the creditworthiness of tenant applicants to assess their reliability and creditworthiness.
A landlord's credit standards can vary based on market demand for rental units. Other variable factors can include neighborhood, property condition, and more.
Experian reported that the average renter in the US had such a credit historyaveraged638. Remember that your creditworthiness alone may not be the only consideration.
For example, a landlord is likely to find a prior clearance of your credit report very concerning.
Can you rent with a credit score of 500?
Both FICO and VantageScore are the two primary credit scoring models. Both modelsindicatethat a credit score of 500 is bad.
Additionally, Experian states that those with a credit score of less than 579 pose a risk. They estimate that 62% of these individuals will become "serious defaulters" on a future loan obligation.
Can you rent with 500 points? Yes. However, most landlords who conduct credit checks will reject these applicants.
Here a consumer should consider making concessions. For example, offer a larger deposit or ask for written proof of employment and income.
Can I rent with a credit score of 300?
Tenant applicants with 300+ credit scores should expect rejections at any tenant screening process. A director of the National Landlords Association confirmed this suspicion. Heexplainedthat “most” landlords are looking for loan values above 600.
With a credit score of 300, you should be looking for no credit check rentals. Find individual landlords instead of chasing leases with a large property management staff.
You should also focus on a strategy for building your credit.
In the meantime, consider alternative measures. For example, find a roommate with good credit or a willing co-signer.
Anthony Amodeo is a regular financial writer in both the business-to-business and business-to-consumer industries. Particular areas of focus include personal finance, small business, real estate and more. He is a graduate of Kent State University. His credit scores are top notch.