If you're looking for an apartment with low credit, you may already know how difficult it can be to rent with bad credit, which means you have negative information in your payment history, you don't have good credit, or you have one combination of both. Most landlords conduct credit checks on their tenants and associate good credit with a responsible tenant, so a prospective landlord could turn down a prospective tenant because of poor credit.
In this guide, we explain the minimum credit requirements for renting an apartment, options for renting with bad credit, what landlords look for on your credit report when they review your rental application, and strategies to help you find a home no matter what your credit rating is.
What is the minimum credit rating to rent an apartment?
If your credit score is in the “fair” range (from 580 to 669) by FICO® standards, prospective landlords can take a closer look at your credit report to get a better sense of your creditworthinesscredit historyand credit habits.
However, landlords consider more than just onecredit-worthinesswhen evaluating potential renters, and if they have a limit of acceptable creditworthiness, that number is at the discretion of the individual landlord or property management company.
While landlords can use the FICO® credit scoring model to make their decisions, each landlord has their own way of determining a tenant's level of risk, so there is no set credit score to determine if you are eligible to rent. The monthly rent payment, the situation on the real estate market and your income also play a role.
Here's how to prepare to rent with bad credit
If you have bad credit or a credit score that falls below a prospective landlord's minimum, you may still be able to rent if you can show you're a good renter. Here are some strategies you can try to make up for bad credit.
Collect letters of reference
letter of recommendationfrom previous landlords or property managers serve as letters of recommendation and can help you provide credible evidence of a positive rental history and timely payment of your rent payments.
Collect proof of income
Landlords take your income into account to ensure you have sufficient funds to pay rent each month and on time. Providing proof of your income, e.g. Documents such as recent payslips, W-2 tax forms, or bank statements can help you convince potential landlords that you can pay in full and on time.
Try Experian Boost®
Experian Boost®is a free service that adds qualifying bill payments, such as utility bills and streaming services, to your Experian credit report. Even if not all bills are eligible, if you've consistently paid Boost-eligible bills on time by adding them, you can instantly increase your FICO® 8 score.
Results may vary based on your individual financial situation and the fact that this tool only affects your Experian credit report and FICO® 8 credit score. So if your lender uses credit reports produced by the other two major credit bureaus, TransUnion and Equifax, or another scoring model, your report and score may not be affected.
To use Experian Boost® you will need:
- An Experian membership (free registration)
- A bank account and/or credit card account in your name that you use to pay your qualifying bills so your payments can be verified
- At least three payments on qualifying invoices in the last six months, including one payment in the last three months
Find someone willing to co-sign your lease
If you're struggling with your credit score, consider oneco-signer. A co-signer is someone who signs the lease for a new apartment with you and is equally liable for paying the rent. They can live with you under the lease. A co-signer with good credit andpayment historycan help increase your chances of approval.
You may also want to consider a guarantor, someone who can vouch for you financially and take over your rent payments if you cannot. Guarantors are not allowed to live with you, but are legally obliged to pay the rent if you don't.As a rule, guarantors have a good credit history. Renters often ask a close friend or family member to act as guarantor.
Whether you hire a co-signer or a guarantor, if you miss a rent payment, the financial responsibility for making the payment rests with you. Late or missed payments can affect their credit score in addition to yours if the landlord reports the rent to the credit bureaus.
Application for apartments with bad credit rating
If none of the above options work for you, here are some other options you can take when trying to rent with bad credit.
Discuss your financial situation with your future landlord
If you have bad credit or have recently had problems with your personal finances such as B. a sudden, short-term job loss that has caused you to run up credit card debt, it may be easier to try and explain your current financial situation to your potential landlord. Because every situation is unique, landlords may be willing to listen and work with you. Make sure you prepare any paperwork needed to support your claim, as well as some that show you can be financially responsible as well.
Apply for an apartment without a credit check
If you're applying for an apartment that doesn't require a credit check, you may have a better chance of getting approved because landlords won't check your credit.Instead, landlords look at your income, debt-to-income ratio, past bankruptcies, arrears, or criminal history.
But be careful – apartments without a credit check can have higher upfront payments or confusing lease terms. So read your lease to make sure you understand all of the terms, be able to determine if the lease is fair, and check the apartment to check for any security issues that could be an issue for you to raise with the landlord need before you sign.
Apply for an apartment with a private landlord
Private landlords are individual property owners who choose to rent out their properties themselves rather than letting them through a property management company. Private landlords tend to be more flexible and have fewer restrictions compared to large property managers.
Consider offering a higher deposit
Paying a higher deposit can help make a good impression on your landlord. A higher prepayment can show that you are financially committed to the rental. It can also be helpful to prepay your rental payments.Just make sure you don't overextend yourself financially lest you put yourself at risk of missing out on payments for other financial obligations.
If you qualify, apply for the government's housing choice program
The federal government offers a program to help families with very low incomes, people with disabilities and the elderly to finance housing. To qualify, you must be eligible for a housing voucher and will then be placed on a waiting list.
What do landlords look for in their credit report?
Similar to a lender, landlords use your credit report to assess your ability to pay under the terms you have agreed to. You tend to look at these risk factors on your credit report:
- Payment history (35%):This factor affects your score the most. It reflects whether you make on-time payments in full or have a history of late payments.
- Amounts owed (30%):This factor is made up of the total amount of debt you owe on credit cards and loans, plus yourscredit utilization ratio(CUR), the sum of your revolving debt balances divided by the total amount of your credit limits.
- Number of negative items:Landlords look specifically for adverse events such as bankruptcies, evictions, and late payments on your credit report.
In some cases, landlords may use tenant screening services or rent-specific credit scores to approve applicants.
One of the best ways to understand what a potential landlord is seeing on your credit report is to review your credit report for yourself. By law, you can check your credit report once a year for free with any of the major credit bureaus by requesting copies onlineAnnualCreditReport.com. However, due to the COVID pandemic, you can continue to receive a free weekly credit report from each of the three major credit bureaus through the end of 2023 (Experian,EquifaxAndTransUnion).Experianalso allows for a free credit score.
What else do landlords look for in your application?
Landlords look at more than just your credit score when deciding if you're a good tenant. Some other factors they consider are:
- Recent criminal history:Individual landlords may refuse a tenant based on a criminal record, particularly where the crime is new and dangerous or high-risk.
- Income History:Landlords screen your income to make sure you have regular employment with enough income to pay your rent in full and on time.
- Confirmation of work:Landlords typically require that you prove you are actively employed by asking for payslips, bank statements, or W-2s.
Do you want to build your credit score?
If you have bad credit or no credit at all and want to increase your credit score, you can start today. AttemptOwn tools for building creditto help you at every stage of your credit building journey and get you back on track.
Disclaimer:FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.
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About the author
Ana Gonzalez-Ribeiro, MBA, AFC® is aAccredited Financial Advisor®and a bilingual personal finance writer and educator dedicated to supporting populations in need of financial education and guidance. Her informative articles have been featured in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal finance and motivational pagewww.AcetheJourney.comand translated into Spanish the book Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English finance courses on behalf of the W!SE (Working In Support of Education) program and has led workshops for nonprofit organizations in NYC.
At Self, our goal is to provide readers with up-to-date and unbiased information on credit, financial health and related topics. This content is based on research and other related articles from trusted sources. All content on Self is authored by experienced contributors in the financial industry and reviewed by one or more accredited individuals.