A low credit score can make it challenging to navigate the world around you. Reaching your financial goals likes buying a car or house may be out of reach until you can move that number upwards toward a healthy score. Without a good credit score, it may even be challenging to find an apartment, as credit scores are increasingly being used in approval for apartment rentals. Landlords often check credit as a matter of course and for many a certain score could make or break your application.
Bad credit is often the result of a few poor financial decisions, but sometimes circumstances can be out of your control. Bad credit can stem from loss of a job or a health issue. Some causes of poor credit include not being aware of mistakes or inconsistencies on your credit report, or simply not being educated on how credit works.
Don’t let a low credit score preclude you from getting an apartment. Learn the steps you need to take to ensure you can get the keys to a new place.
1. Review your credit score
First, make sure you know and understand your credit score. You are entitled to a free credit report from the major credit agencies (Experian, Transunion and Equifax) once per year. In addition, some states will allow you an additional report per annum. Once you know your credit score you can compare it to the average ranges. A number under 580 is considered poor, under 670 is usually seen as fairly low, above 740 is very good and over 800 is exceptional (link to Average American Credit Score).
If you see errors or confusing information in your report, do not ignore it. According to a government study, around 25 percent of people experience errors on their report. Reports commonly contain incorrect account numbers, an errant late payment notification or an incorrectly listed loan. Disputing an error means making sure you present a solid case. It is best to inquire in writing or via email) and then by telephone as well. It takes time to dispute an incorrect credit score, so check your report well before you are looking for a place to live.
2. Be open about credit issues
If otherwise you are a stellar candidate, be honest and open about your credit history with your landlord. If there are extenuating circumstances regarding your personal credit, be prepared to offer a little proof. If there is an error on your report that you are in the middle of fixing, consider giving your potential landlord written documents that explain the discrepancy. Keep in mind that large management companies are less likely to bend the rules, and they often have a credit threshold that is the cut-off for renting. So, if you have a credible story as to why your credit is the way it is, seek out independent landlords who may be more understanding.
3. Provide reference letters
Reference letters are a good way to make your case to a potential landlord. Ideally, the letters you submit should be from former landlords who can speak to the fact that you paid the rent promptly and were an exemplary tenant. Barring that, an employer that can guarantee your employment and that you make enough to afford the new apartment can be useful.
4. Offer to move in immediately
Landlords that are sitting on empty properties are hemorrhaging money — the faster you can move in, the more appealing of a tenant you will be. So be prepared. Have your checkbook with you and be ready with your ID when you are looking at potential apartments. Even if you need to float two leases for a few days, it might be worth it.
5. Prove high income or savings
Generally, landlords are looking for a tenant with an income of at least forty times the rent. With a rent of $1,300 per month they’d want you to be making at least $52,000. If you are making a salary that is closer to fifty or sixty times the rent you’ll likely appear to be a stronger candidate to prospective landlords.
To prove your income, you’ll want recent pay stubs and perhaps a recommendation from your boss. Proof of significant savings is another way to sway a suspicious landlord. If possible, demonstrate your attention to financial health by having at least two accounts: savings and checking. Offering to pay your rent in automatic payments can also be a nice way to prove your financial stability — especially since most landlords hate chasing down checks.
6. Shop in different neighborhoods
Many still say that the best way to find a place to rent is to walk around the neighborhoods where you are interested and look for signs. You may find that there are landlords who you never would have met who are saving money by renting semi-independently. These owners may be less worried about your credit score and be more open to persuasion with material like recommendation letters.
Also check into neighborhoods where homeowners have put their places up for rent. This is often because a bad real estate market has led them to it. They might be more inclined to rent to you even if you have bad credit, because they are losing money on an empty property, usually while trying to pay a mortgage on a new place.
7. Pay a larger deposit or a few months’ rent upfront
Typical security deposits are one month’s rent, but perhaps offer more (a month and a half) as a buffer against the idea that your bad credit makes you less reliable. You can also see if offering to pay for a few months up front will sway a landlord. In some places it’s common to pay the first month and last month’s rent along with a security deposit. If your landlord doesn’t require that, maybe float the idea as an incentive.
8. Get a co-signer
If someone (like a parent or sibling) who has superior credit will sign with you that can often satisfy a prospective landlord. Keep in mind that person is on the hook if for whatever reason you can’t pay rent, so it should be someone with whom you have a great relationship and who is willing to back you up if there are any issues. Often a co-signer has to make more than just the standard forty times the rent. That person is often required to make eighty to one hundred times the rent in order to be trusted by the landlord.
It’s not an easy task to find a place to live when your credit is less than favorable, but there are a number of options available if you know what to look out for when applying for an apartment. The best thing to remember is that poor credit is not an insurmountable problem. It is possible to improve your credit score with a little planning and patience. In the meantime, there are a number of strategies to employ when you are looking for the apartment of your dreams.