Renting with Bad Credit — is it Possible?

Television makes renting look easy — you simply go look at an apartment, decide whether you want to live there, and then tell the leasing agent “I’ll take it.” Voila! Done! Real life, of course, is more complicated than that.

In real life, you will have to jump through several hoops before moving into a new place, particularly if you have bad credit. For most hopeful renters, the scariest part is submitting to a background and credit check. Before you panic, know this: it is possible to rent an apartment with a less-than-stellar credit score or a checkered past. It takes some effort, but it is possible. Here is what you need to know.

What Credit Score Do You Need to Rent an Apartment?

This is, believe it or not, a tricky question. Rental companies tend to prefer applicants with FICO scores of at least 620. They will, however, rent to people whose scores are a little lower if those people agree to pay a higher deposit, have a co-signer, or meet other specific criteria.

If your score is in the low 500s (or lower!), however, you would be considered a high-risk renter and getting approved for a lease could be very difficult. Still, there are steps you can take to make the process easier for yourself.

How to Rent an Apartment With Bad Credit

If you have bad credit (generally scores lower than 580 are considered “bad”), here are some of the things you can do to mitigate your low credit score.

Look for Listings With No Credit Check

Believe it or not, there are property owners out there who don’t want to deal with the hassle of a rental application, or running a background check on a potential renter. They are rare, however, so you’ll need to put in some effort to find them.

Be Upfront With a Potential Landlord About Your Financial Issues

Write a letter to the landlord and explain your financial issues and what you are doing or have done to improve your situation. If you have a reasonable explanation of your low score, they might overlook it.

Provide Letters of Recommendation

Start with the people a potential landlord cares the most about: current/former landlords and employers. These are the people who can speak to your financial stability, what kind of tenant you are, etc. From there move on to anybody else who can vouch for you. Therapists, caseworkers, co-workers, neighbors, friends, etc. Ask them to write reference letters on your behalf. The more reliable people you have to vouch for you and reassure any potential landlord that you’ll be a good tenant, the better.

Add a Co-Signer

Having a credit-worthy co-signer can help offset your own low score during the application process. A co-signer will be legally obligated to step in and help with rental payments if you default. Landlords typically prefer co-signers to be family members.

Pay a Larger Security Deposit or Prepay Rent

The most common way to make up for a bad credit score is to pay a larger security deposit to the rental company. This can be a hefty sum — the minimum is usually at least 1-2 months’ worth of rental payments on top of your other move-in costs. It also helps if you provide your prospective landlord proof of income, and copies of your bank account statements.

Find a Roommate

Not only does having a roommate help offset some of the costs of living in an apartment, but their good credit score can also help offset your bad one.

Prove You Have a Stable Income and Can Afford the Rent Payments

A good rule of thumb is to be able to provide bank statements for the last 3-6 months as well as any W-2s or current paystubs. If you have only recently started a new job, a copy of your contract or a letter from your new employer will also be helpful as proof that you have a steady work history.

Note: If you are self-employed, providing copies of last years’ tax returns as well as copies of your business license and the current year’s profit-loss statements will also be helpful.

Be Willing to Settle for Less

Everybody wants a gorgeous and luxurious apartment. Can you actually afford it, though? Widen your search parameters to include the less desirable neighborhoods in your town and apartments with fewer amenities included.

Avoid Complexes Run By Big Property Management Companies

Multi-state corporate rental property managers are more likely to be strict about their rental requirements. Instead, look for local management companies that specialize in your city. They’ll be more flexible because they’ll be familiar with the economics of the area.

Look for Private Listings

Not every property owner rents through a property management company! Many are DIY-ers who can be flexible about details like credit scores.

Want to know more? These tips might help you through the approval process.

What are Landlords Looking for When They Check Your Credit?

This can vary from landlord to landlord. Most credit checks, however, will include at least the following criteria:

  • Payment history
  • Rental history
  • How much/what kind of debt you owe
  • Have you declared bankruptcy? When?
  • What kind of information about you will the landlord see?

In addition to what they find in your credit report, a landlord will also learn the following details about you:

  • Current name and any other names you might have used
  • Current and previous addresses
  • Current and previous employers
  • Credit score/rating
  • List of your credit accounts and payment history with lenders
  • Public records like bankruptcy or foreclosure, evictions, and tax liens
  • Your credit inquiries and applications over the last two years

How to Rebuild Your Credit Before Renting an Apartment

If you know that you will need to start applying for a new apartment in the next few months, this is the perfect time to focus on rebuilding your credit.

Here is how you do that:

Start with Your Credit Report

Get a current copy of your credit report from the three major credit bureaus: Experian, TransUnion, and Equifax. The easiest way to do this is via AnnualCreditReport.com. Make sure your report is mistake-free. The credit bureaus will have instructions on how to report and dispute any errors you find.

If you owe money to creditors or lenders, make all your payments on time.

If you have time before you need to start applying for your new place, taking out a credit builder loan can also be helpful in boosting your score.

Your Renter’s Report

The CFPB has a number of tools you can use to make sure that the information landlords get about you is accurate. One of them is your AmRent report. Another is your TransUnion SmartMove report. Check these out and make sure they are mistake-free!

Criminal History or Evictions?

If you have criminal convictions or evictions on your record, don’t panic. There are resources available that you can use to help you become more attractive to potential landlords.

A good place to find out what resources are available in your area is to contact local nonprofits who help with rehousing individuals. They might have a program you can take advantage of.

For example, in Oregon and Washington, there is a program called Rent Well that prospective tenants can take to help make them more attractive to potential landlords.

Assess Your Personal Finance Situation

Moving comes with additional expenses. Make sure you can pay all those bills in addition to your monthly rent:

  • Pet deposits/Pet rent
  • Utility deposits, etc.
  • Moving costs (renting a truck, etc.)
  • Buying new furniture and basic supplies (for example: most apartments do not come with shower curtains or kitchenware!)

It’s also worth looking at the other monthly costs you’ll have to pay in addition to your rent:

  • Renter’s Insurance (most landlords require it)
  • Utilities like electricity, water, sewer, gas (some landlords include those costs in the rent, others don’t)
  • Internet
  • Cable TV (if you still watch cable TV)
  • Phone (if you need a landline; some rental properties still require them in case of emergency.)
  • Food
  • Transportation costs
  • Laundry (not all rental units have washers and dryers!)

The Bottom Line

Renting with less than perfect credit is possible. You may have to jump through additional hoops and pay more money to get those coveted keys. Still, it is possible!

FAQs

What Does My Credit Score Mean?

FICO and Vantage Scores tell potential lenders and landlords how big of a risk you are, financially. The higher your score, the more attractive to lenders and landlords you are. A high credit score will also help you down the road when you might want to qualify for real estate loans, car loans and credit cards.
Your individual score is based on your credit history, which is the information contained in your credit reports. Therefore, you need to make sure your credit reports are accurate.

Do Student Loans Hurt My Credit Score?

“Hurt” is a loaded word. Student loans affect your credit score. If you make your payments on time every month and pay the loans off quickly, this will be a huge boost to your score. Missing payments or letting the loans drag on will have a negative effect on your score.

Is it Possible to Rent with a Poor Credit Score and No Guarantor?

Sometimes! Some landlords will let you pay a larger deposit instead of finding a co-signer. Your local housing assistance program might have a class you can take to help offset your score. There are options out there.

Is it Easier to Rent a House or an Apartment with Bad Credit?

The type of dwelling you want to rent matters less than the amount of the monthly rent. If you can afford the rent and meet the landlord’s criteria, renting a house isn’t any more difficult than renting an apartment. That said, houses almost always cost substantially more to rent than apartments.

Is it Possible to Refinance a Car Loan with Bad Credit?

Refinancing a car loan can decrease your interest rate, adjust your terms, and save you money over the length of your loan. But if you’re stuck with bad credit, refinancing may be a bit more complicated. Read this to learn more.