Why Does Credit Matter When Renting an Apartment?

Landlords and property management companies, similar to lenders, often check an applicant’s credit as part of their background screening process for prospective tenants that are seeking to rent an apartment or other housing unit.

Some property managers check credit. Others don’t. The nicer the house or apartment is, the more likely a credit check will be required.

Landlords who are evaluating someone for potential tenancy may access their credit report from Transunion, Equifax, or Experian—the three primary credit bureaus. Expect your credit to have a greater influence on whether you will qualify than your current income will. 

Some landlords only check credit reports for red flags like recent evictions. Others check credit scores too and have minimum credit score requirements. 

Landlords must adhere to the federal laws of the Fair Credit Reporting Act (FCRA) when conducting credit checks in the rental application process. Landlords may check credit reports, rent payment history, criminal history, conduct employment verification, and more.

What is a Bad Credit Score for Renting?

Applicants with bad credit scores ranging from 300 to 579 should anticipate difficulties qualifying for an apartment rental. Many landlords will require a minimum credit score of 620.

Summary of FICO Score Ranges 

According to Experian, individual landlords might look deeper than merely an overall good or bad credit score and assess some of the following:  

• Credit payment history: A landlord might consider the length of credit history, late payments, or other bad credit history.
• Rental credit history: Does the potential renter’s credit report show any bad credit entries from a previous landlord? Among the largest concerns would be an eviction, which is the legal process for removing a tenant who fails to pay the monthly rent.
• Existing debt: Despite having a good credit score, a potential landlord might hesitate to lease to applications with excessive overall amounts of debts.
• Bankruptcies: Depending on the type of bankruptcy filing, these negative entries remain on credit reports for seven to ten years.

Consumers with fair or poor credit scores should review a free copy of their credit report to assess their credit rating. Applicants who recognize that their low credit score will not qualify might save the $25 to $50 application fees that landlords often impose. 

How to Rent With Bad Credit

Be Honest About Your Credit Problems and Show Progress

Consider being upfront about your bad credit with a prospective landlord or property manager, particularly when you know that a credit check is required. It might prevent you from wasting your time and could elicit a reasonable proposal from them that is mutually acceptable.  

Compile documentation that indicates progress or improvement in your financial situation, such as recent pay stubs, current rental payments, or bank statements showing you are accumulating significant savings.

Prior to a meeting to view an apartment, be prepared with relevant and organized documentation and make an effort to present the best version of yourself.  

Arriving punctually, looking presentable, and making eye contact, are all positives that help counter a bad credit score.

Keep in mind that many large corporately-owned real estate firms or “high-end” apartment complexes might have “no exception” policies or may not be receptive to negotiating or modifying the agreement terms.

Look for Property Owners Who Don’t Check Credit 

Some property owners, particularly individual landlords with only a few rental properties, do not check the credit scores of prospective tenants. For many of these landlords, verification of current employment will suffice.

Unfortunately, you will have fewer overall housing options and many of the properties with no credit check requirement might be less desirable. Consider making a short-term sacrifice by leasing a unit that might be smaller than you desire or have fewer amenities. 

Make a Bigger Security Deposit Upfront

Don’t underestimate the impact that a larger security deposit or paying a month or two of rent in advance can have. Landlords view tenants with bad credit as a greater risk; however, having deposits available or rent upfront directly reduces that risk.

In this scenario, it would also be wise to set aside extra funds to pay any security deposit requirements imposed by the electric, gas, or other utility providers. Often, utility providers will also conduct credit checks and require a deposit from those with low credit scores.

References From Previous Landlords

A current or previous landlord that can attest to your record of making timely payment can be very helpful. Similar to a reference that you may provide to a potential employer, remember to speak with the landlord to obtain their permission and confirm their willingness to vouch for you.

Most landlords and property management firms do not ordinarily report your ongoing payments of rent to the credit bureaus. For this reason, a former landlord can provide information that is not on your credit report.  

Have some written documentation that supports your payment history in addition to providing the name and contact phone number for the landlord serving as a reference.

Unlike a revolving credit account or installment loan, paying your monthly rent payments on time generally will have no effect on your credit score. However, adverse activity such as breaking a lease or being evicted from an apartment most likely will be reported.

Show That You Have Steady Income

Having a steady job with a sufficient level of income helps to offset a low credit score. Try to compile documentation that proves your income going back for several consecutive months rather than only a few weeks. It might also help to offer to set up automatic payments from your bank.

Keep in mind that being prepared with multiple forms of documentation that reflect positively will likely have a greater impact. For example, having some combination of proof of income, a summary of current rental payments, utility bill payment history, reference from a landlord, etc.

Get a Roommate

Consider moving into an apartment with a roommate, preferably an individual that has good credit. If the roommate is listed on the lease agreement exclusively, then the arrangement represents more of a subleasing relationship.

Although having a roommate might be less desirable than having your own place, splitting the costs of the rent and utilities may allow you to focus on paying any outstanding debts and building your credit.

Consider getting an apartment lease cosigner that serves as a guarantor. They would assume responsibility for the payments if some unforeseen problems such as a serious medical problem or loss of employment occur.

A cosigner is generally someone who is more than a casual acquaintance, as they become responsible if you fail to meet the financial obligations.

Use Credit Strong to Improve Your Credit

Consumers seeking an excellent solution for building their credit standing should consider the credit building loans offered by CreditStrong. As a part of Austin Capital Bank, Credit Strong is both FDIC insured and five-star rated.

CreditStrong plans bolster both credit history and savings, and they don’t require a cosigner. Here, Austin Capital Bank provides an installment loan and deposits the funds that are borrowed into a savings account for securing the loan.

The consumer begins making a set monthly payment on the loan and all this activity is reported directly to the three primary credit bureaus. 

How long does it take to build credit using a credit building loan from CreditStrong?

Usually, your Credit Strong account will begin emerging on the credit bureau reports from 30 to 60 days after the initial payment is made on the account.

Although having poor credit makes it more challenging to be approved for an apartment rental—it is not insurmountable.

Many of the aforementioned strategies involve making some short-term concessions, but you can ultimately achieve the home you want and be well on your way to having excellent credit!

CreditStrong helps improve your credit and can positively impact the factors that determine 90% of your FICO score.

Start Building credit today