In 2017, a study from the Pew Research Center found that a larger percentage of American households were renting a house or apartment (as compared to owning), than at any point in the past 50 years. At the same time, with rents at all-time highs, and a shortage of affordable housing, renting is more competitive than perhaps ever before.
As a part of the rental process, landlords will want to confirm that you can afford the apartment. This typically involves verifying your income, and possibly reviewing your bank statements and other financial accounts.
They’ll also want to ensure that you’re going to be a responsible tenant. This is done through references, background checks, and perhaps most important of all, by checking your credit reports and credit scores.
Most landlords have a cutoff credit score, and if you fall below that number, you’ll probably be disqualified from renting. In other cases, a landlord might view certain negative credit items (especially evictions), as grounds for refusing to rent to you.
The minimum credit score required for renting an apartment varies considerably, depending on which city you live in, and what sort of property you’re looking to live in. In highly competitive rental markets like New York City, the San Francisco Bay Area, or Los Angeles, most landlords are known to require a FICO credit score of at least 650, often even 700. In less populated parts of the country, many landlords will consider scores of 600, and possibly lower.
Credit scores also vary by the type of property. A luxury apartment complex, managed by a large real estate firm, will often require a higher credit score, than a single family rental home, owned by a small local landlord.
If you’re dealing with poor credit, renting a home can be quite challenging. However, there are several strategies to make this process easier. Let’s take a look at each one.
1. Show That You Pay Your Rent On Time (And Obtain References From Previous Landlords)
There are many causes of bad credit. Perhaps you were sick, and had medical bills you couldn’t pay. Or, maybe you lost your jobs, and fell behind on credit card payments. Whatever the reasons, your score is lower than property management companies are looking for.
Your credit score, because it is seen as a reflection of whether you’ll pay rent on time, and be a good tenant. However, what if you could show that in the past, you’ve always paid your rent on time?
When you apply for the apartment, you can provide bank statements from the past 6 months, highlighting the exact date your rent was paid. This helps confirm that you’ll be a responsible tenant.
Assuming you have a good relationship with your current landlord/management company, you should also ask them to act as a reference, and confirm that you paid on time. Many companies ask for this information anyways, when you apply for a new apartment, but being able to provide it beforehand increases your chances of being approved.
2. Pay An Extra Security Deposit
When you’re approved for a rental unit, you’ll usually be asked to provide a month’s security deposit. This is to reduce the landlord’s risk, in the event you damage the property, are evicted, or break your lease, and move out early.
If you have poor credit, property managers/landlords think that you’re more likely to not pay rent on time, or otherwise run into trouble. You need to convince them otherwise.
One way of accomplishing this is by providing a larger security deposit. If your credit is below average, you might offer to pay two months, or even three months of security, rather than just one. This makes it clear that you’re serious about being a good tenant, and despite your credit history, you are committed to acting responsibly.
In some cases, landlords will refund the extra security deposit, if you always pay on time for the first year, and live in the apartment for multiple years. Once you’ve shown that you’re a good tenant, the relationship with your landlord becomes smoother.
However, other landlords will wait until the lease is over, and they’ve inspected the property for damage, before agreeing to refund any deposit. Either way, providing extra security increases your chances of being approved.
3. Offer To Pay Extra Rent Upfront
As we’ve mentioned, if you’re dealing with poor credit, a landlord will have serious concerns about whether you’re going to pay your rent on time. What better way to address these concerns, than to pay rent ahead of schedule?
When you apply for the house or apartment, you’ll disclose to the landlord/property manager (before they order your credit reports) that you have some credit issues. For this reason, you’re willing to pay some amount of rent upfront. After they run your credit, you can negotiate the exact amount of rent to be paid upfront.
How much rent should you expect to provide? This depends on both the landlord you’re dealing with, and your credit score. The lower your score (especially if you fall below 600), the more likely it is that you’ll need to provide 3 months or more of rent, at the time that you sign your lease.
4. Have Someone Cosign Your Lease
If a landlord is uncomfortable with your credit history, it can help tremendously to find someone who has stronger credit, and have them act as your cosigner. That person’s strong credit history and finances can be used to offset your poor credit.
The person who cosigns is effectively responsible if you fail to make payments on the lease and are evicted, or otherwise run into trouble. The landlord will initially attempt to collect from you (since you signed the lease), but after that, they’ll pursue your cosigner, either through debt collectors or in court.
For these reasons, it can be tough to convince a friend or family member to cosign your lease. Simply put, you’re going to have to appeal to their desire to help you, and their trust that you will do what is right.
You might try providing your friend or relative with some sort of fee (as a sort of security deposit), to make them more comfortable with the deal. However, in large part, you’re going to have to rely on your potential cosigner believing in you as a person, and wanting to help you.
Another option is to find a cosigning company, which will guarantee your lease in exchange for a fee. Companies like WeCosign, Co-Signer.com, and HelloRented will cosign your lease in exchange for a fee.
These companies don’t always work with applicants who have poor credit – often, they’re designed more for people who don’t have all the cash on hand to qualify for a lease. However, they will sometimes consider applicants with poor credit, so it makes sense to ask.
5. Work With A Smaller Landlord
Large management companies and property owners tend to have extensive procedures in place, around credit and income requirements for their applicants. However, smaller landlords (including owners of just one or a few single family rental homes), are often somewhat easier to work with. After all, they only own a few units, and are probably paying for a mortgage on these properties. Therefore, they want to keep these units occupied as much as possible.
For this reason, it is sometimes possible to convince such owners to rent to you. They also might request an extra security deposit, or a few months of rent paid in advance. However, these property owners are on average more open to poor credit applicants, than many larger rental companies.
6. Rent In A Less Competitive Neighborhood Or Town
It’s no secret that the better a neighborhood or town is, the more people who want to live there. Therefore, landlords have their pick of which tenant to choose, and will be more strict in terms of rental requirements.
However, if you’re willing to consider an area with lower rental demand, you might be able to obtain approval more easily. After all, fewer people want to live there.
Of course, there’s a reason why this area might be less desirable. Perhaps it’s a bit isolated and thus a longer commute, or maybe schools in the area aren’t very good. Maybe there are some quality of life issues, including crime.
With poor credit, your options are somewhat limited. You cannot be as particular as someone who enjoys a credit score above 700.
The good news, however, is that it is very much possible to improve your credit score over time. Use your less than desirable current circumstances as motivation to achieve something better. Many people have done it before you. You can as well.
The Final Word
Renting with poor credit can be quite frustrating. You’ll frequently be rejected, and have to spend additional time (and often money), to find a place. However, don’t lose hope. There are landlords who will work with you, and you’ll ultimately find a place.
In the long run, you should work on improving your credit, so that you don’t face these issues in the future. By taking the right steps, it is absolutely possible to rewrite your financial story.
