How to Get That Great Apartment When Your Credit is Not so Great

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More and more landlords are doing background checks as a measure of streamlining the tenant application process. This is especially true if you’ve got your heart set on one of those apartments owned by large corporations. But, even single property landlords are more aware of new online tools available to them to easily check the credit and background of applicants so you’ll want to know what to do if your credit is less than good.

What do landlords want?

A landlord’s main concern is to choose an applicant who will pay their rent on time every month as well as respect and take good care of the property.

Someone with a good credit score is on record paying bills on time and using their available credit responsibly. Someone with a poor credit score may not pay bills on time, may have accounts in collections, or have a large debt load or other money management problems that will be explained by looking further at the applicant’s credit report. Once you understand that landlords use this information to help them choose an applicant who will pay the rent on time every month, you can understand why landlords check credit.

But landlords do not deny rental applications solely due to race, color, religion, sex, handicap, familial status, public assistance income, age, or national origin because they must comply with the Fair Housing Act and the Equal Credit Opportunity Act. Also, if your application is denied due to information uncovered in a credit check or background check, a landlord is required to supply you with a copy of that report, according to the law.

Can renting help your credit at all?

On the flip side, new credit scoring models such as FICO XD, FICO Score 9 and VantageScore 3.0 (and VantageScore 4.0, due to be released this fall) are designed to take rental payment history into consideration if it is reported to the credit bureaus. The good news is you can now sign up with different services, such as the free PRBC service, for your landlord to report your rental payments to the credit bureaus and this can help boost your credit score. The bad news is this only works when used with those three new score models, which are not widely used yet.

According to a 2014 Experian study, 59% of participants who had no credit files before adding rental data achieved a good (prime) VantageScore 3.0 score. And, out of the 89% of participants who were already scoreable before including the rental data in their credit files, the addition of positive rental data increased their VantageScore 3.0 scores by an average of 29 points.

What’s a good credit score for renting an apartment?

There is no hard and fast cut-off for good credit for renting an apartment. So, you could base the cutoff to line up with good credit categories for car loans and mortgages. According to Experian’s VantageScore 3.0 credit score range, “prime” or good credit is a score between 661 and 780. Above that is excellent credit and below that is nonprime and then at the lowest end are scores below 600 which represent poor credit.

According to TransUnion’s SmartMove tenant screening ResidentScore model, which predicts the likelihood that any tenant will default on a lease, need to be evicted or pay late, the lowest acceptable ResidentScore is 560.

There are many other credit checking and rental credit scoring services online for landlords to use such as Experian’s Apartment Credit Check which releases your VantageScore 3.0 credit score as well as your Experian tenant check report.

If you are getting ready to go apartment hunting, it pays to check your free credit scores from a free credit score site such as where you will receive an Experian credit score that may be similar to the Apartment Credit Check score provided to the landlord.

What to do if you have no credit

If you have poor credit or no credit there are some things you can do going forward to help boost the likelihood of being accepted on a rental application.

Having no credit is actually better than having poor credit because it’s a lot easier and quicker to build a positive credit history than it is to drag yourself out of a poor credit history. To build credit quickly from no credit, you can apply for one credit card and charge small purchases you can pay off before the due date every month. This will quickly establish a positive payment and responsible credit use history.

And, if you use one of the services like the free PRBC which tracks your past rental payment data as well as utilities and cell phone payments, you can print and show this positive payment history to any prospective landlord to help your application. You can also entice a landlord by attaching actual pay stubs to prove your income or, if you are self-employed, you might also furnish several month’s of bank statements as well as income tax returns.

If you have enough money saved up, you might even offer to pay an additional month’s security deposit to help put a landlord’s mind at ease. And, most landlords are amenable to having a co-signer or guarantor to sign the lease who will be responsible for paying to the end of the lease if you do not.

If you’ve been renting for a long time, get a referral (available on paper as well as available by phone) from any of your previous landlords, especially your most recent landlord, who will vouch for your timely payments as well as how you kept the apartment.

Be sure you can really afford that monthly rental payment

One of the first things landlords look at, before even going for the credit check, is whether you can afford the monthly rent. Save yourself the trouble by running the same debt-to-income (DTI) ratio on yourself to see if your income supports the rent payment.

Add up all your current monthly debt payments and divide it by your monthly total gross income. If your ratio is higher than 36, you really can’t afford that rent payment and should look for a less expensive rental to improve your odds of being accepted.

If your credit is really poor, you might investigate whether professional credit repair could work for your situation. You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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