Did you know that a bad credit score can hurt your chances of renting your dream apartment?
Renting an apartment is a business deal; it is up to the landlord to choose a great fit.
That’s why tenants often undergo a thorough vetting process before signing the lease agreement.
Generally, the vetting process helps the landlord establish whether you’re financially stable enough to afford the apartment. Besides, your new potential landlord will be keen to establish that you have a positive rental history.
Now, the question many ask is, how does credit score affect renting? If so, what credit score do you need to rent an apartment?
Well, it can be complicated.
The good news is, we’ve got an answer for that. Here’s everything you need to know about the score you need to rent an apartment.
What Credit Score Do You Need to Rent an Apartment?
Generally, you need a “good” credit score to consider your request, during the rental application process. Even though there’s no standard credit score for renting an apartment, a higher credit score will boost your chances of getting accepted.
Though meeting their minimum requirement doesn’t guarantee approval, knowing what they look for could help you position yourself as a great rental candidate.
Landlords, especially in competitive markets like San Francisco or New York, may require a minimum credit score before getting approved for a particular building. Sometimes it may be beyond the average credit score of your location.
When it comes to credit scores, each landlord is different. The general consensus is that a good credit score is 720 or higher.
With that said, most landlords and property managers look for a credit score above 600. The higher your credit score, the better.
FICO and VantageScore credit scores typically range from 300 to 850. A higher credit score will indicate a tenant has a habit of managing finances responsibly.
On the other hand, a lower credit score will indicate a tenant has trouble with financial management. As such, they could struggle to pay their monthly rent.
What Landlords May Look for on Credit Reports
Apart from the credit score, a landlord will be more interested in checking a potential tenant’s credit reports. Often, a credit check provides a complete picture of the applicant’s financial history.
A bad bill can send your credit score plummeting; however, if that’s the only blemish on your credit report, the risk is minimized. That’s why looking into the entire credit report is crucial, other than just checking the current credit score.
Here is what the landlord will be looking for when performing a credit check:
- Payment History
- Rental History
- Collection Items and Public Records
Prospective landlords typically check your payment history for the past 24 months. If the landlord establishes you’ve been consistently paying your credit card bills on time, then one box will be checked, and on to the next.
Some credit bureaus may include rental history on their credit reports. That can help landlords predict whether applicants will pay rent on time.
Landlords want tenants who pay rent on time, plain and simple! If you can prove you have a history of paying rent on time, you’ll have little to no struggle with your application.
Collection Items and Public Records
Things that are likely to be the deal-breaker are usually evictions, unpaid utilities, and bankruptcies. Many of the landlords understand debt like student loans, medical bills, or credit card debt.
That said, before you submit your rental application, you’ll want to check your credit report and score.
Tenants’ screening goes beyond the credit score; so brace yourself for a lengthy screening process. The screening may include criminal background checks, a review of your employment history, and/or contacting references.
Remember this: When a prospective landlord checks your credit, it could result in a hard inquiry. Hard inquiries can have an impact on your credit scores.
What Factors Impact Your Credit Score?
According to the Fair Isaac Corporation (FICO), which produces the FICO score, there are five primary factors used to compute a credit score, namely:
- Payment history – 35% of your credit score
- Amounts owed – 30% of your credit score
- Length of history – 15% of your credit score
- New credit – 10% of your credit score
- Types of credit used (credit mix) – 10% of your credit score
Credit cards payment history is the most crucial ingredient in credit scoring, and even one missed payment can hurt your score.
If you pay your credit card bills every month on time, it will bump your credit score up. Set a routine, and you can grow your creditworthiness quickly, as long as you can avoid missing a credit card payment.
The general range of FICO credit scores are as follows:
- Exceptional: 800–850
- Very Good: 740–799
- Good: 670–739
- Fair: 580–669
- Poor: 300–579
How you use your credit line will also influence your credit score.
Ways to Help Improve Credit Scores
A credit score affects your chances of renting an apartment. However, a low credit score shouldn’t be the reason to deter you from moving to your favorite apartment. You can always work on your credit score to improve it over time.
Here are a few ways you can show responsible credit use and help improve your credit:
- Pay Bills On Time
- Pay More than the Minimum
- Keep Your Balances Low
- Apply Only for the Credit You Need
Pay Bills On Time
According to both FICO and VantageScore, your payment history can be a significant factor when determining your credit score. As such, keep email reminders about your credit cards bills to avoid a late payment or entirely missing out.
A late payment can significantly hurt your credit score. Always be on time when it comes to paying bills.
Pay More than the Minimum
To improve your credit utilization ratio, aim to pay off the highest amount you can (or the entire amount if possible).
Keep Your Balances Low
The CFPB recommends that you not spend more than 30% of your available credit. A low credit utilization ratio — a measure of how much of your available credit you’re using — could be a sign that you’re using your credit responsibly, and not overspending.
This could help improve your credit score.
Apply Only for the Credit You Need
Credit scoring formulas are based on several things. For instance, if you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively.
Can You Rent an Apartment with a Low Credit Score?
Not all landlords look at the credit score; most of them often check your monthly income and other factors before considering your application. However, if you have a low credit score and they check it, how can you win them over?
Everyone has a different financial situation. Some might be recovering from a bankruptcy, while others might be building their credit score for the first time. Either way, those facts will be reflected in the credit score.
Other factors could still help you win the application. You just have to know how to go about it.
With that said, it may take a lot of effort to make that happen.
The worst thing you can do is lie about your poor credit score. You’ll get caught! Which is a red flag. Plain and simple!
Landlords go overboard just to ensure they are leasing the apartment to the right tenant. They go as far as hiring external agencies to do extensive screening on the applicant.
Opening up to your prospective landlord about your credit score before screening will give you some fighting chance.
Explain Your Situation
As discussed earlier, everyone has a different financial situation. As such, after reviewing your credit history, you can be able to explain the blemish causing your poor score. It is ideal, especially if these issues stem from mistakes made years in the past.
Maybe your credit history is pretty good, apart from the one-hit you took for a bad bill.
Highlight Your Income
Proving that you earn at least three, four, or even five times your monthly rent could give you some fighting chance.
However, if your income doesn’t boost you, look for another factor that can increase your chances.
Offer to Pay a Higher Security Deposit
Most landlords see renters with sub-650 credit scores as a more significant risk. To get rid of this perception of being a high-risk tenant, offer to pay a higher security deposit.
As long as you’re timely with rent payments and respect the property, it’s a no-risk move on your part since you’ll get the deposit back at the end of your lease.
Landlords see this as a sign of good faith. Win-Win!
Provide Plenty of References
During the screening process, landlords are keen to check every detail submitted in your application.
References are one of those items landlords are incredibly interested in. They will support your argument for timely rent payments.
It can be a deal-breaker at times, so make sure whom you include as your reference can be trusted. Generally, it’s more convincing if you have friends who can vouch for you.
Friends and bosses are often a reasonably good choice, but your previous landlord will be the best person to have as your reference. If you have a good relationship with your previous landlord, ask them to be a reference for you.
Armed with a positive reference from your previous landlord, you will be able to get an apartment easily.
Use a Cosigner
If you are a new renter with no score, using a cosigner will be a good step toward getting that apartment. Essentially, a cosigner will take the responsibility of paying rent if you’re unable to pay it.
It is good to note that the requirements of a cosigner are much more strict. For example, they must have a higher income, score, plus more. If your cosigner or guarantor has a high score, it can increase the average credit score of all signers.
Look for a Roommate
Adding a roommate to your lease or rental agreement can increase your creditworthiness, as well as your qualifying income.
How You Can Figure Out if Your Credit Score is Good Enough
Before renting an apartment, it is wise to look at your credit report and score. If you don’t know much about credit scores, it is simple!
Each year, everyone can pull one copy of their credit report from each major bureau for free through AnnualCreditReport.com.
It is the ideal place since the Federal Government supports that site.
However, you might want to look elsewhere for credit scores, since those credit reports don’t contain your credit score.
Where to turn for your credit score may vary. For example, some credit cards let cardholders see their FICO scores for free.
With such credit cards, it is easy to check your credit score. There are other free places you can use to get a glimpse at a recent credit score. For example, websites like Credit Karma and Nerdwallet will offer you that service.
With that said, many of them won’t show you your FICO score. Instead, they use the VantageScore.
VantageScore and FICO share the same credit score range (300-850), but how they calculate their score is different.
For this reason, there’s a fairly good chance that your FICO and VantageScore credit scores will vary from time to time.
How Long Does it Take to Raise Your Credit Score?
If you have a bad credit score, it may feel awful, right? It’s like a red mark follows you everywhere.
Improving your credit score is a worthwhile goal. The better your credit score, the better rate you’ll get for all of your loans. Besides, getting approved for an apartment will never be an issue.
With a high credit score, your loans will be cheaper, while they will be expensive if you have a low credit score.
The real question is, how long do you have to wait before your credit score shoots up?
There’s no exact answer to that, but generally, your credit score can improve anywhere from a month to as much as 10 years. It all depends on the factors we discussed earlier that impact your credit score.
For example, timely payment of credit card bills, among others factors, will help improve your credit score fast.
What to Do if Your Application is Rejected Because of Your Credit Score
As usual, not all applications go through or get accepted. As such, if your application is rejected, you should receive an official notification. This is required by law.
The reporting agency will send it showing you the score that the landlord saw and instructions on how you can request a copy of your credit report for free.
With this report, you’ll get the chance to review for errors. That way, if you were rejected due to a mistake, you can reach out to the credit bureau to have the issue corrected.
Unless there was a mistake on your credit report, the landlord isn’t required to work with you if you don’t meet their minimal cutoff.
With a cosigner in place, however, you can request from the landlord to see if they will be willing to accept one. If not, then the best way is to move on and find another apartment.
Finding an apartment for rent is an exciting journey, but that could be cut short by the application process when landlords require more details, especially credit reports, and so on.
However, reports and scores shouldn’t scare you off! As long as you have a good credit score, you can easily rent an apartment of your choice.
On the other hand, if you want to rent an apartment and you have a bad credit score, that doesn’t mean it’s the end; you can still use other factors like paying a higher security deposit, among others, to increase your chances.
If you want to get an apartment, avoid hurting your credit history and be careful about missing out on your credit card payment. Many places, like San Francisco, for example, will require you to meet their minimum credit score to rent an apartment.