Renting can be difficult, especially if you’re renting with bad credit. Your credit score is one of the main factors that landlords look at when considering potential tenants, and if you’re renting with poor credit, you may not be able to rent the apartment you want. In this blog post, we will discuss how credit history affects your ability to rent an apartment and what you can do to improve your score. We will also provide tips for finding a rental property despite a low credit score. So if you are struggling to find an affordable place to live, keep reading!
When you hear the term credit history, it is often used interchangeably with a credit score. However, credit history and credit score are two different things. Your credit report records your financial activity, including late payments, defaults, and bankruptcies. Your credit score is a numerical representation of your creditworthiness based on information in your credit report.
A high credit score means you are a low-risk borrower, while a low credit score indicates you are a high-risk borrower. Credit scores are calculated by credit bureaus, such as Experian, Equifax, and TransUnion. These companies use different algorithms to develop a credit score, so your score may differ from bureau to bureau.
Depending on the credit report service a landlord uses, they may not receive a credit report with the credit score information. If you have a low credit score but a clean credit report, that works in your favor. But even if a property owner can see your score, it is not the end of the world because they are usually more concerned with your ability to pay your rent and bills on time.
On the other hand, having a bad credit history check is much more damaging because it suggests that you are an unreliable person who fails to keep up with your financial obligations. And if your report shows that you have a lot of debt, it may suggest that you are having difficulty keeping up with your bills and are less likely to afford your rent. It is another reason why you would get denied for an apartment or other housing.
If you have no credit history, it is not necessarily bad. If you are young, you will have a very limited credit history. In this case, landlords may be more willing to work with you because they understand that you are starting from scratch. And if you recently immigrated to the United States, you can always supply your past credit history from another country as supporting evidence that you are a reliable renter.
No one can change their credit history and score overnight. But in the meantime, you cannot survive without a place to live. Luckily there are ways you can still rent with poor credit history.
One way to convince a landlord that you are creditworthy is by providing proof of a steady job income. If you show a longstanding employment status or have a high salary, this will show the landlord that you can pay your rent on time. Another clear indication you can afford the rent is by offering a monthly pay stub at least three times as much as the monthly rental cost. So even if you have a lot of debt, the property owner or manager is more likely to believe you can still make your rental payments.
Another way to increase your chances of getting approved for an apartment is by offering to pay more upfront. The extra fee can include:
This strategy works because it shows the landlord that you are willing to put your money where your mouth is and that you are confident in your ability to make rental payments on time.
If you are renting with bad credit but know someone with good credit, you can ask them to co-sign your lease agreement and be legally responsible for the rental payments should you fail to make them. While this is a risk for the cosigner, it shows the landlord that you have someone else who is confident in your ability to make on-time rental payments.
A rental guarantor service is a company that will act as a guarantor for your rental application. Even if you have bad credit or no credit history, the rental guarantor service will vouch for you and act as your cosigner. This can be a great way to apply for apartments with bad credit, especially if you do not have friends or family who can cosign for you. However, it is important to note that a rental guarantor service will usually charge a fee, so be sure to weigh the cost before you decide to use one.
Some landowners will look past a bad rental credit check by increasing the rental price. While this may not be ideal, it is a way for you to get into the unit you want without worrying about your credit score. The common problem is that these property owners tend to be more hands-off regarding home repairs and maintenance.
Another solution is to look for apartments that don’t do rental credit checks. While these units are not easy to find, they do exist. This option is usually only available for smaller units or rooms in a house, but it’s worth looking into if you’re having trouble getting approved for an apartment.
Once you are approved for a rental, do not forget your credit history. Even if you plan to purchase a home in the near future, your credit history still plays a crucial part in your large purchases, such as home mortgages or car loans. So use your new rental to build up your credit history. By paying your monthly rent with a credit card, you can greatly improve your credit history and credit score within a short time. And by paying your rent on time, your landowner or the management company will report your good financing habits to the credit bureaus.
Your credit history is an important factor in why you would get denied for an apartment, but it is not the only thing landlords value. If you have bad credit, there are still ways to get approved for an apartment. By providing proof of income, paying more upfront, or finding a cosigner, you can increase your chances of getting approved for your desired rental unit. And don’t forget, once you’re approved for a rental, use it as an opportunity to build up your credit history so that your next application process will be easier.
What to do next?
The good news is, you CAN take control of your credit. We believe that everyone should have the opportunity to build their financial health.
Sign up for a Build account today. With a Build credit builder loan, you can build credit and increase your savings.
How does a credit builder loan work?
You make a small contribution to a bank account each month.
Build then reports those deposits to the credit bureaus as credit-worthy payments, which builds your credit history and profile.
Positive Payment History – making consistent payments over time – is the largest driver of your credit score.