Property managers and landlords evaluate applicants based on several factors, including your credit score. A higher credit score means you’ll have better chances of securing a rental property. It will also help you stand out from among other applicants who are also interested in renting the apartment that you want.
Property managers and landlords want renters who can pay on time. That’s why they check your credit report to evaluate your financial capacity and if you’ll be a reliable renter in the future. Although there’s no universal requirement for the minimum credit score to rent a house or an apartment, a fair credit score of around 600 is typically an acceptable credit score for renting. It will help you get an apartment without worrying about the high security deposit, finding a co-signer or guarantor, or paying extra rental payments in advance.
Credit reporting agencies typically use FICO and VantageScore in credit reports. Here’s the table of scores and ratings for your reference:
How Do Property Managers and Landlords Check Your Credit?
Landlords and property managers use different methods to check your credit. These include consulting the credit bureaus, using third-party tenant screening services, or enlisting the help of certain organizations specializing in this area.
Credit Bureaus
TransUnion, Experian, and Equifax (the three national credit bureaus) offer tenant screening services for the rental market. All these tenant credit check counts as a soft credit pull, which means they don’t affect the applicant’s credit score.
TransUnion’s SmartMove offers a convenient tenant screening service that allows property owners and landlords to access important information, such as the applicant’s credit history, eviction, and criminal histories, with the renter’s consent. The landlords may pay for this service or pass on the cost to the rental applicant.
For Experian’s tenant credit check services, rental applicants can buy a copy of their credit report for $14.95 and allow at least one prospective landlord to check their credit report for up to 30 days.
Equifax also has a similar service that lets landlords verify a prospective renter’s employment background, rental and criminal history, and creditworthiness.
Tenant Screening Services
Aside from the three major credit bureaus, there are third-party companies that offer tenant screening services for a certain fee such as e-renter.com. Landlords and property managers will get access to the applicant’s credit information, including bankruptcies, evictions, and collections.
These credit checks may be considered as a hard pull or a soft pull. You may request a copy of your credit report and provide it to the landlord or property manager when you make a rental application. This way, you can make sure that your credit score won’t be reduced by less than five points because of a hard inquiry.
Landlord Associations
The National Association of Independent Landlords and other similar organizations may provide tenant credit reports to property managers and landlords. There’s a fee associated with it, which depends on the association that offers the report.
What Do Landlords See in Your Rental Credit Check?
Your rental credit check reveals a lot about your financial history to property managers and landlords. Aside from your credit score, they will see your income information, credit card payment history, approved loan applications, loan payments, and public record filings, such as eviction reports, tax liens, and bankruptcies.
Landlords consider garnishments, late payments, missed payments, charged-off credit cards, and repossessions as red flags. You may find it challenging to secure an apartment rental if you have these negative marks on your credit report.
Even so, there are still options for renting an apartment if you have bad credit. Property managers and landlords may ask you to put in a larger security deposit or a few months of rental payments in advance. You may also be asked to look for a co-signer with a good credit standing or provide references or a letter of recommendation from your previous landlords. These will lessen the risk to the landlord, so you have better chances of getting approved.
How to Rent an Apartment with Bad Credit?
All is not lost even if you’re struggling to find an apartment because of bad credit. There are some ways that may help you secure the approval you need. Here are some tips on how to pass a rental credit check:
1. Pay a Higher Security Deposit
Most property managers and landlords ask their renters to pay a security deposit and one month’s rent in advance to get the apartment they want. Since you have bad credit, you have to demonstrate that you’re committed to paying your rent on time and you want to build trust with the property manager or landlord. You can do this by paying a higher security deposit or paying at least two month’s rent in advance.
2. Look for a Co-signer
Ask a family member or a close friend who has a good credit history and rental payment history to co-sign your lease. Before they sign anything, make sure they understand what they’re getting into. Be reminded that your co-signer will be responsible for paying back the rent if you fail to pay them on time. So, you need to be committed to paying your rent on time. If you don’t, it can damage your relationship with your friend or family member.
3. Provide References
Be ready to present references or letters of recommendation from your previous property managers, landlords, or employers. These documents are votes of confidence from qualified individuals who can vouch for your capacity to make timely payments. These may help improve your chances of securing an apartment rental.
4. Find a Roommate
Landlords and property managers may consider potential renters with bad credit if they share the rent with a roommate. Of course, your roommate must have a good credit history if you want to get better chances of securing approval.
5. Show Proof of Income
Prepare your proof of income when you try to apply for an apartment rental. Property managers and landlords want to make sure that their tenants can pay their dues on time every month. You need to be able to pay the rent using only up to 30% of your income. Showing them that you earn enough income per month to pay rent may put them at ease and help them look past your less than stellar credit score. You can use your W2 tax forms or pay stubs, and a letter from your employer to prove your income. Property managers and landlords may also call your employer to verify your employment status and income.
6. Search for No Credit Check Apartments
Most property managers and landlords conduct a credit check on all their applicants. But there are some who offer no credit check apartments for those with less than ideal credit scores. You can find such listings on the classified ads of your local newspaper, Facebook Marketplace, or on Craigslist. However, you must practice caution if you choose to go this route. Make sure that the property manager or landlord has a good reputation and their apartment is safe and secured.
7. Improve Your Credit First
Although there are ways to help you get around your bad credit when looking for a house or apartment rental, it’s still best to improve your credit first. Not only will it make securing a new lease easier, but it will also open better financial opportunities once you have a better credit score. You can boost your credit score through the following:
- Use a secured card – If you have bad credit, a thin credit file, or no credit at all, opening a secured card can help you build your credit. They work like regular credit cards. The main difference is that you have to provide a security deposit, which will amount to your credit limit when you apply for a secured card.
- Pay off your debt – Your payment history is one of the major factors that affect your credit history. Late or missed payments will hurt your credit score. But if you make timely payments, you can expect your credit score to improve, as well.
- Keep your credit utilization ratio low – Another important factor that affects your credit score is your credit utilization ratio. You must keep it around 30% or less than 10%, if possible.
What is Renter’s Insurance and How Much Does It Cost?
If you’re looking for a house or an apartment rental, it’s best to get an insurance policy that will cover your possessions. Be reminded that your landlord or property manager’s insurance policy covers only their building, whether it’s an apartment, duplex, or single-family home. It doesn’t include your personal property and that’s why you need a renter’s insurance policy.
According to the data provided by the Insurance Information Institute, the average cost of a renter’s insurance policy in the United States is $14.90 per month or $179 per year. The actual cost you need to pay for this type of insurance coverage will depend on the state where you live. This type of insurance coverage protects all the items you have in your rented apartment or house. It also covers your personal liability in case something happens in your house, such as when someone gets injured within your premises.
Conclusion
Property managers and landlords consider your credit score when deciding whether to approve your rental application or not. The minimum credit score to rent a house or apartment is typically around 600. But if you have bad credit, you may struggle to find an apartment rental but not impossible.
You can increase your chances of securing a new lease by paying a higher security deposit, paying a few month’s rent in advance, having a co-signer, providing references, finding a roommate with a good credit standing, and presenting proof of income. You can also go for no credit check apartments, but you need to be careful of shady agreements or activities. Finally, the best way to secure an apartment without any problem is to improve your credit score ahead of time.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
