Renting an apartment with less than stellar credit is difficult but not impossible. A spotty credit history isn’t a death sentence, either. Keep these things in mind when apartment hunting and follow these tips to make the process easier.
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Renting is a part of life for over 36 percent of U.S. households, according to a Pew Research Center report. But for many, the process is rife with uncertainty.
Landlords often run a credit check on potential tenants, so trying to find an apartment with a bad credit score or a blemished credit report can be disheartening.
However, it’s not impossible. There are certain steps potential tenants can take to better appeal to landlords.
Tips for renting an apartment with a less than stellar score
What do landlords actually look for?
Do landlords look at credit scores or reports? In truth, it’s actually a little of both. What landlords really want to know is if you’re able to pay rent without issue, and your credit history can provide some insight.
Often, a landlord will run a background and credit check on a potential renter either through credit bureaus, landlord associations or tenant screening services.
This is to ensure a potential tenant has:
- A credit score of 600 or higher: When running a credit check, the magic numbers landlords look for fall between 600 and 620 – at minimum – according to Peter Warden, editor at The Mortgage Reports. Those numbers go up depending on the type of rental.
- No late payments: It goes without saying landlords want dependable tenants. So, if a late payment pops up on your credit report or you have one or more accounts in collections, you will more than likely need to have a transparent discussion with the landlord.
- No evictions: This is a little tricky. “An eviction, itself, doesn’t show up on a credit report so you won’t see that term,” says Rod Griffin, director of public education at Experian. However, if the landlord who evicted you turned your unpaid lease payments over to a collections agency, that would likely appear on your credit report and stay there for seven years.
- Financial stability: This is especially important if you don’t meet the score requirement or have multiple collections in your report. Many landlords will look at your rent-to-income ratio to ensure potential applicants will be able to pay the rent every month.
- No lawsuits: To a landlord, a pending lawsuit has the potential to eat up the funds you would normally set aside for rent.
- No criminal convictions: While criminal records don’t show up directly on credit reports, landlords can find them if they run a background check. And unlike a late payment, this type of information doesn’t “fall off” after a certain amount of time. Landlords may refuse to rent to applicants with criminal records, but they cannot turn you away if you were arrested but not convicted, according to a memo from the U.S. Department of Housing and Urban Development (HUD).
If you want to be prepared and get a leg up on the application process, request a copy of your credit report from AnnualCreditReport.com before apartment hunting.
It’s also a good idea to request reports from all three credit reporting agencies – Experian, Equifax and TransUnion – because negative credit marks that may suggest a past eviction might appear in one report but not the others. Checking all three can also help you identify other potential negative marks on your credit – like collections, late payments and more – that might make a landlord turn down your application.
With the information in hand, you’ll see everything a potential landlord will look for and can begin taking positive action.
Reduce your debt before searching
Easier said than done, right? But reducing your debt can go a long way in ensuring you get the apartment you’re really after.
“Think of your credit report as the master file that tracks all of your loan payments and debts,” says Ted Rossman, industry analyst for CreditCards.com. Your credit report “shows whether or not you’ve paid lenders on time, how much you owe, how long you’ve been using credit and how many different credit accounts you’ve managed.”
By cracking down on the debt that will show up on your credit report, you can make renting – and in effect, your life – easier.
- First, stop incurring any more debt. If your credit card utilization is high, ease up on spending. “Try to keep it below 30 percent,” says Rossman. “But whatever it is, you’ll help your credit by bringing it down. Add an extra payment or two mid-month for even more impact.” Credit utilization is the amount you have borrowed compared to your credit limits. The lower the utilization, the better.
- Choose a payoff strategy. You can either funnel all your extra cash into your highest-interest card while making minimum payments on your other cards, or you can pay off the card with the lowest balance first while making minimum payments on other cards. Both strategies are very common, so it just comes down to what works for you.
- Consider a balance transfer card. This can be a good option as you can consolidate payments while saving on interest. However, keep in mind, you need a credit score in the good to excellent range to qualify for many balance transfer cards.
See related: 4 wrong ways to escape credit card debt
Renting with bad or no credit
If reducing your debt isn’t an option at the moment, and you’re worried your credit score will be the ultimate roadblock, try these other tactics. A landlord might be willing to overlook a few blemishes if you can assure them the rent will always get paid.
- Add a co-signer. This works best with someone you trust (and someone who trusts you), who also has a higher credit score. By adding a co-signer, you are putting that person’s credit on the line, so be cautious – they are promising to pay the rent if you can’t.
- Make 3x the monthly rent. According to federal guidelines set forth by HUD, if you pay more than 30 percent of your income for housing, you are considered rent burdened. So, for many landlords, this is the magic number. “I think about it like I’m qualifying them for a loan,” says Emily Du Plessis, founder of RentalRookie. “I take their total income minus their debt (which I see on their credit report) which gives me their debt-to-income ratio … This is how lenders look at individuals qualifying for a loan, and I implement that when looking at possible tenants.”
- Drop a larger deposit. This serves as a “peace of mind” for your prospective landlord. Since a deposit covers any damages incurred during the rental period, a larger deposit is something they can put toward lost income. But don’t get swindled. Maximum rental deposits are capped in some states, so know your rights as a tenant.
- Look into alternative data. If you’re just beginning your apartment hunting, it may be worth it to check out alternative data to give your credit score a boost. By signing up for programs like UltraFICO and Experian Boost, you stand the chance to up your score in real time. Another option is adding your current rent payments to your credit history.
- Ask for letters of recommendation. These can come from previous landlords, old roommates, your employer or even your bank. The point is for your prospective landlord to see you as a model, bill-paying adult.
- Consider a roommate. If you can find a roommate with a better credit score, they could be the primary applicant (preferably someone you already know who is OK with this). Or you could find someone advertising a room for rent that is already securely on a lease.
- Find an apartment that doesn’t check credit. If all else fails, find an apartment complex that doesn’t check credit scores. These are usually outside city limits, so it may not be your target area, but they’re worth considering.
Best time to rent an apartment
Now that you know what to do about renting an apartment, when should you do it? Depending on what you’re looking for, renting during certain times of the year can be beneficial to you.
As a renter, you have more choices in the summer but are privy to better prices in the winter. According to a recent study by apartment listing site RentHop, the “best” months to rent are between December and March, while the “worst” months to rent are between May and October.
Summer is only seen as the worst time to rent because of higher rent prices. But you tend to have more selection because of the high inventory and demand of the season. According to another analysis, “renters can expect to see 11 percent more listings in July versus 12 percent fewer in December,” says Nancy Wu, economic analyst for StreetEasy.
So, winter rent discounts may be the better route for you, but only if your current lease is flexible. No discount is worth the fees associated with a broken lease.
How to increase your rental odds
Depending on how far out your move-in date is, these tips could help put things in perspective.
|Projected move-in date||Steps you can take|
|3 months out or less|
|6 months out|
|9 months out or longer|
With all this in mind, the renting process should hopefully be easier. Happy hunting!