So you’ve finally decided to move out of your Mom’s basement and rent an apartment. After poring over prospects, you’ve set your sights on this cozy condo located near a major park surrounded by harbor villages and a few upscale restaurants. Better yet, the view of the sunset outside the bedroom window is to die for. You’re getting a new lease (no pun intended) on life and you couldn’t be more excited.
And then just as when negotiations are going smoothly, the landlord suddenly asks you to authorize a credit check.
It catches you off guard, and then you feel a creeping sensation of uncertainty. Maybe you just graduated, and you don’t have a credit report to speak of yet. Or maybe you had been temporarily unemployed, causing you to miss your due dates several times. And then you just had a sobering realization: your credit rating could jeopardize not just your chances of renting an apartment, but your entire future as well.
Are you worried about spending the rest of your life as a freeloader or a homeless person because of bad credit rating? If yes, take comfort in the fact that you’re not alone.
But first, here’s a reality check on why you have to mind your credit report when trying to rent an apartment:
According to a TransUnion study, nearly half of landlords check a tenant’s credit health before making a leasing decision.
Based on the above statistic, what you’re dealing with here is a “glass half full or half empty” scenario.
On the one hand, you can take comfort in the fact that your situation is not hopeless. Fifty-fifty is good odds, though you may have to deal with a couple of rejections on account of your bad credit rating. But on the other hand, having a poor credit score also limits your choices. In the final analysis, what you can do is take stock of your situation and then take the necessary steps needed to bolster your chances of renting the apartment you fancy.
Why landlords check a prospective tenant’s credit history
Many businesses employ risk management first before deciding to do business with clients. Landlords are no different. By doing credit checks, they can make assessments on whether there’s a likelihood that you’re going to pay your rent late sooner or later. It goes without saying that landlords are financially inconvenienced if tenants don’t pay their rents on time, and it’s a situation they naturally want to avoid.
How landlords and property managers go about checking your credit history
There are a variety of ways landlords do credit checks.
- Tenant screening services. Some landlords use tenant screening services such as e-renter.com to screen rental applicants before making a leasing decision. What landlords do is do a search according to a certain credit score range and the site tells them if a particular prospective tenant meets or exceeds those standards. Reports can also reveal bankruptcies, judgments, evictions, and other background information.
- Landlord associations. There are numerous associations comprised of landlords offering credit checking services for a fee, the most popular one being the National Association of Independent Landlords. The downside to choosing this process is that it counts as a “hard inquiry,” which could negatively impact your credit score.
- Credit bureaus. Landowners and property managers go to the three main credit bureaus — Experian, TransUnion, and Equifax– when checking and reviewing credit reports of applicants. Credit checks require your consent before they are approved.
- Person to person. Some owners may choose to request a copy of your credit report upfront or ask you about the status of your credit score in person. It’s always better to have a copy of your report on hand before applying for an apartment lease so that you can answer important questions and be able to provide context on why your credit is poor.
How to get approved when your credit score is poor
Obviously, having a spotty credit can lower the chances of your rental application being approved. But it still depends on the context of your narrative, and a big part of it depends on a combination of factors, which we’ll discuss in more depth below.
One important thing to consider here is the personality of the landowner. Some landowners see a credit score of 620 as the minimum accepted figure. Some are more lenient, and may only require you to agree to special arrangements before deciding to finalize a deal.
If your prospective landlord is undecided but is open to negotiations, you can offer to pay a larger security deposit or advance rent payments in order to seal the deal.
Some landowners who are worried about bad credit ask potential tenants to find a co-signer, preferably someone with a good credit rating, who will agree to co-sign the lease for you. By co-signing, that person is legally bound to pay the rent if you fail to do so. After making payments on time for a certain number, the landlord may agree to remove the co-signer from the lease.
The best course of action before deciding to rent an apartment is to check for yourself what they’ll find on your credit report should they ask for a copy. It’s easy. Better yet, it’s free. In fact, you’re entitled to get a free credit report each year from three of the aforementioned credit bureaus.
If you find that your credit leaves a lot to be desired, what you can do is take the necessary steps to improve it. After all, a good credit score can help you rent an apartment the same way it can help you buy a house. Paying your outstanding debts and making on-time payments are always a good start.