Renting an apartment can be difficult for people with bad credit. Most landlords require tenants to have a minimum credit score in order to rent. But most people rarely check their scores and don’t know how to improve a low score.
Before you start looking for the perfect rental home, consider researching your own credit score, and if it’s too low, spend some time trying to improve it.
What is a credit score?
A credit score is a number that lenders use to evaluate your creditworthiness. In most cases, an average credit score is required when renting a property because the score can give landlords insight into how you pay your bills. Credit card companies play a key role in your score because that number comes from your credit history.
A low credit score doesn’t necessarily mean you’re mismanaging your money, it might just mean you haven’t accumulated enough credit history to improve your credit score. Either way, knowing your credit score before you start looking for a new home can make the entire process easier.
Where do credit reports come from?
Three different credit bureaus generate credit reports: Equifax, Experian, and TransUnion. Whenever someone says they are getting a credit check, they are getting a report from one or more of these agencies.
The reason there are three different main credit bureaus is because each produces slightly different reports. Because of this, credit scores can vary, so someone checking your credit may need an average score.
When you do a credit check, the result is more than just your credit score, although that number is very important. This number is called a FICO credit score and is like a summary of your entire credit report. This is the first place landlords look when screening tenants, but they may also want to take a closer look at your entire credit history to assess how responsible you are for paying rent.
What is a good credit score?
The range of credit scores is quite large. The minimum is 300 and the absolute maximum is 850. However, credit bureaus do classify credit scores into specific ranges. So, if your FICO score is between:
- 300-579: bad
- 580-669: Fair
- 670-739: OK
- 740-799: very good
- 800-850: Excellent
Most landlords want a higher credit score because it means you have demonstrated responsible credit behavior before. You’ve done things like paying your bills on time.
Why do landlords like tenants with good credit?
Good credit and a high credit score tell an honest story about you as a renter. Landlords can look at your payment history for existing loans and bills and infer how likely you are to pay your rent in full and on time every month.
A lower credit score may cast doubt on how responsible you are financially. Especially if your credit history shows problems with late credit card payments or paying bills on time, your financial stability may be called into question.
If this happens, your prospective landlord may need to contact your previous landlord to confirm that your bad credit has not affected your ability to pay rent in the past. They may also ask you to supplement your credit report to prove that the late payment is unlikely.
What also does a landlord look at on your credit report?
While your actual credit score is important, landlords review your entire credit report. Here’s what else they’re looking at:
- Payment history and whether you pay your bills on time each month
- Rental history and whether previous landlords have reported this information to credit bureaus
- Unpaid rent history, including evictions and any outstanding payments you owe to previous landlords
- The size of your debt and whether you have a large number of credit cards or unpaid loans
- Bankruptcy information can remain on your credit report for up to 10 years
Each of these elements can refresh a credit score, explain why it’s on the scale, but also provide you as a renter with insight into any major red flags.
What is the minimum credit score for renting?
The minimum credit score required to rent depends on the landlord. Some landlords are willing to work with tenants with poor credit, while others may require tenants to have good credit.
Going back to the credit score spectrum, if your credit score is at least 670, you’re in the best position. If your credit score is within the fair credit score range (580-669), you may need to bring in a co-signer for your lease to assure the landlord that you will pay the rent.
That’s why it’s important to know your credit score before looking for a rental property. If you already know it’s on a lower level, you can enter into an initial conversation ready to discuss other options to convince a future landlord that you’re a good tenant.
Acknowledging up front that the tenant screening process will result in a lower credit score may be all the landlord needs to work with you. Even in a competitive rental market, you’re likely to find a sympathetic tenant who will allow other sources to prove your ability to pay your rent on time.
What if my credit history is bad?
The best part about a credit score is that it’s not permanent. Your score fluctuates constantly, and you can even make changes to longer credit histories with problems to improve your FICO credit score.
You also don’t have to accept your credit score as the only measure of your ability to pay rent. You can prove your reliability when renting through other means than a good credit score.
How can I improve my credit score?
There are some things you can do to improve your credit score. First, make sure you pay your bills on time. Second, try to keep your credit utilization ratio as low as possible. Third, pay attention to your credit history.
If you have any negative marks on your credit report, try to remove them. You can also use a credit monitoring service to track your credit score and credit report.
If your credit score is low because you have no real credit usage history, change it. Use a secured credit card once a month to build credit and pay your bills on time.
Other steps you can take to improve your credit:
- Check your credit report for errors. Errors in your credit report can lower your credit score.
- Repay or discharge any outstanding debts. Lowering your debt will help improve your credit score. If you have a lot of credit card debt, you might also consider ways to consolidate payments to make it easier and faster to pay off your debt.
- Establish a good payment history. Making all types of payments on time will show your landlord that you are a responsible tenant. This includes debt payments in addition to monthly bills.
- If you’ve never had a credit card before, apply for one.
- Keep existing credit accounts open, even if you don’t use them regularly. This helps build a long-term credit history.
- Pay all bills on time. The more late payments you make, the lower your score will be, so be sure to pay on time.
Even if you can’t make an impact on your credit score before you start looking for an apartment, providing evidence of the positive steps you’re taking to make changes can help landlords believe you’ll be a good tenant who won’t struggle to pay your rent.
What can I do to supplement my credit score?
If you already pay your bills on time but are only aggressively paying down long-term debt, you won’t necessarily be able to improve your credit score quickly. If this is the case, you may need to go out and generate reports from the credit bureaus and dazzle the property manager in other ways to prove that you’ll pay your rent on time.
Find a co-signer
There’s no better way to increase a landlord’s confidence in your ability to pay rent than to add someone else’s credit history to the mix. Bringing in a co-signer with a higher credit score and more reliable credit can avoid your low credit score.
However, if you don’t pay, ask a close friend or family member to co-sign with you and they will be responsible for your rent. So give them a plan on how you’ll afford the monthly rent, as well as a back-up plan in case they need to cover your costs for repayment.
Provide character references
Having someone else validate your level of responsibility can get you closer to landing the perfect rental home, even if the local rental market is tough. Despite your credit score, character references from past landlords or even your employer can prove that you have the right characteristics of someone who pays rent on time.
Past landlords can provide the best reference as they can establish your rent payment history.
Share more evidence
Credit reports don’t always reflect your current financial situation. Past mistakes can stick with you for quite some time, so to determine why it’s different now, you may have to provide evidence beyond your credit score.
Documents such as pay stubs and bank statements from previous months can help you understand your current financial situation. You can also provide documentation related to how you are paying off your current debt to prove that you are making your payments on time.
If you recently received a higher credit limit, sharing that information can also support your case. Credit card issuers won’t increase your available credit limit unless you deserve it. They also want their money.
provide something extra
If the landlord or property management company is still worried about letting you become a tenant, you can also overcome a lower credit score by offering a larger down payment. You can do this in a few different ways.
Offer to pay a larger deposit up front. Consider doubling your security deposit to give your landlord a cushion if rent is delayed. Assuming the home is in good condition when you leave, you’ll get that money back once you move out.
You can also prepay additional rent in advance. Your landlord may only ask for the first and last month’s rent, but if you can, you can pay 3-6 months in advance to assure the landlord that you have enough funds to cover the costs.
Consider finding a roommate
Bringing a roommate means there will be two credit scores to review, not just yours. If they have a high credit score, the landlord can get the assurance they need from your overall credit score, rather than your credit score alone.
Can I still rent an apartment with a poor credit score?
If no other strategy works when it comes to your credit score, there are landlords who don’t run credit checks. While they are harder to find and the rent may be higher, going this route allows you to not have to deal with your credit score at all.
Searching online or even browsing the classified ads in your local newspaper are two great ways to find listings that don’t require a credit check. It may take longer, but with a thorough search, you can find some rentals that don’t require your credit score to have your rental application considered.
A low credit score doesn’t mean you can’t rent an apartment. It can make the process a little tricky. But if you prepare ahead of time by working to improve your score and gather more evidence of why you’re a good renter, you may be able to find a landlord willing to work with you.
