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If you have bad credit or even no credit and need to rent an apartment, the whole process can be extremely frustrating.
And with more landlords requiring credit reports to rent, it’s more important than ever to understand how your credit report impacts renting an apartment and what is and isn’t required.
This article is going to help you with a lot of these types of questions and concerns.
We will go over credit scores, credit history, and how they pertain to the real estate rental process. We’ll also give you some tips on how to rent an apartment with bad credit.
Understanding Your Credit Scores and History
Your credit history over time culminates into a ‘score’ based on that history. With one view of your credit score, any type of creditor can get a fair reading of your ability to make payments against any credit given to you.
The most common credit scores range between 300 and 850. The higher your score, the less risky you’re seen as far as paying off your credit. Obviously, if you have a credit score of 850, you shouldn’t have any problems with renting a home.
In fact, good credit gives you a lot of advantages. Such as being able to get a mortgage to buy your home rather than rent, or even negotiate lower interest rates on credit cards.
But on the other hand, having really bad credit can be disastrous and can make things like getting a new place to live or even a small loan almost impossible.
Your credit history is a record of how well, or how badly, you handled your debt.
This can include any credit cards that were issued to you, payment history for any type of loan, and even bankruptcy or tax liens are all part of your overall credit history and stay with you forever.
Why Landlords Use Credit Checks
If you’re a landlord and looking to rent to someone, you first want to know if they’re even able to handle the rent and whether or not you’ll be getting your rent on time.
Normally, people with a good credit rating can manage their finances a lot better than people with poor credit. At least that’s what’s assumed.
Then there’s the issue of property damage. If you destroy their home, will the landlord have any recourse? Suing someone with poor credit means if they ever are able to pay, it could take years to recoup their losses.
That’s why today, most potential landlords will run a credit check in order to review your credit score, credit history, and rental history when you submit your rental application.
This will give them an overall idea of whether or not you’ll make a good tenant or not. If your credit history is good, it shows your prospective landlord that you can handle your finances well and should be able to make the rent on time each month.
A bad credit rating, however, demonstrates that you don’t deal with your finances well, or that it’s likely the landlord will not get their rent on time and it may be a much higher risk to rent to you.
And while you still may be able to find an apartment even with bad credit, the fact is your choices will be limited and you likely will be paying a larger security deposit so the landlord feels more comfortable.
Where Rental Credit Checks Come From
Property managers and landlords use third-party services to do credit checks. Popular services include Rentler, Zillow, and Rentspree’s tenant credit checks.
Rentler and Rentspree use the credit bureau TransUnion’s SmartMove credit check services. It gives your property manager a look at your credit report, credit score, criminal background check, and eviction history.
Zillow uses a similar service from the credit bureau Experian. From Experian’s website, it shows you an example credit report your landlord will receive:
They almost always do a background check do. Here is what an example background check looks like with an Experian credit report:
Not All Landlords View Your Credit Report The Same
Landlords or property managers don’t always look at your credit history the same. What’s important to one may be nothing of interest to the other.
Understanding these different views on your credit report can help you understand how to respond to questions more intelligently as well as increase the chances of getting the apartment you want.
Credit report vs. credit score: Some landlords and property managers don’t even take your overall credit score into account. Instead, they might focus on your payment history, outstanding debts, and public records to better understand the probability of you paying rent on time. This is good news if you don’t have a stellar overall credit score.
Acceptable credit score ranges: The actual number that each landlord or property manager will accept as a minimum credit score varies as much as the individuals looking at these scores. Everyone will evaluate your score differently. The problem is you won’t know what they require unless you ask. Asking what the minimum requirements are upfront can help you save a lot of time if you know from the start you don’t have the required score to secure the apartment.
Rent cost and credit requirements: In most situations, the more expensive the landlord’s property is, the higher the credit score they’re going to want in order to agree to give you a lease. Landlords of luxury apartments or high-end properties are more likely to desire tenants with better credit profiles, as higher rent represents a more significant financial risk. Be realistic about your rental budget and target properties with rent prices that align with your credit standing.
Many landlords require your rent to be no more than 30% of your gross income. This may be a good rule of thumb when considering your budget for a rental home.
Getting the Lease Even With Bad Credit
Just because you have a bad credit score or poor history doesn’t necessarily mean you won’t be able to secure a lease. It may be a bit more difficult, but it isn’t impossible.
Here are a few tips that can help:
- Find an individual landlord: Working with an individual landlord is always easier than working with big housing complexes with strict rules and procedures. You can speak to an individual and discuss ways you can make them feel more at ease with renting to you. Some ways might be paying more than one month’s rent upfront or offering to pay more for your security deposit.
- Provide a co-signer or guarantor: Many landlords just want to feel safe in that they’ll get their rent on time and if there is any damage, there is someone willing and able to pay for them. Offering a reputable friend as a co-signer quells a lot of these types of worries for landlords and is a great way to secure a lease even when you have bad credit.
- Offer additional months’ rent upfront: Another way to make a property manager or landlord feel more secure renting to you is to offer a few months’ rent right up front. It’s one thing to say no to $500, it’s another when the total is $1500. Plus you’re demonstrating that you do indeed have money and will pay the rent every month.
- Demonstrate steady employment and sufficient income: Showing your potential landlord your employment records and wages and demonstrating that your rent is affordable can also make a positive impact on a landlord’s decision to rent to you or not.
- Obtain a letter of recommendation from a previous landlord: Personal recommendations from previous landlords go a long way. Especially if your new landlord can call and verify with them that you did indeed pay your rent on time and that there was no damage to their property when you moved out.
- Consider renting with a potential roommate: See if you can find someone with a better credit score than you to be your roommate and use their good credit history to work for you both. Just make sure you’re also on the lease or you’ll have no recourse if you and your roommate end up having problems living together.
No Credit Versus Bad Credit
There is a big difference between having no credit history and having bad credit history. And each landlord will have different views on each of these, so it’s important to understand the distinction.
Having no credit history can be better than having a bad credit history in some instances, but it also doesn’t guarantee that you will be able to secure a lease.
No credit history usually means you’ve never borrowed any money or secured a credit card.
Reasons for this might be that you’re young and just haven’t been wrangled into the system yet, so it can be difficult for a landlord to base their opinion on you and whether you’re a safe bet to rent to.
This also shows you haven’t made any bad financial decisions, yet, and you may be a stable renter and worth taking the risk on. It really depends on how the landlord looks at it.
A bad credit history is, well, bad. This can include a history of late payments, defaults, high debt levels, or other negative marks on your credit report, which results in a low credit score.
This demonstrates to a potential landlord you are not good with money, or you simply don’t have enough to cover your expenses each month.
Which indicated to the landlord that you’ll be late with rent or just not be able to pay at all. None of which are great results.
So if you had a choice, having no credit at all is still better than having bad credit.
Having no credit can mean anything from perhaps you are great with your money so you never needed a loan or credit card.
Or you are financially responsible, you just haven’t needed anything that would be reported on your credit rating.
In the end, all of this depends on how the landlord will view things on a case-by-case basis.
What Credit Score Are Apartments Looking For?
In the most general sense of the question, a credit score of 620 or above is usually considered an acceptable credit score to secure a rental agreement. But that is in no way set in stone.
Remember, landlords and property managers are people, and unless they work for an apartment complex that has strict minimum score policies, the numbers are going to vary to the same degree the individuals do.
So what one landlord may accept can be totally different from the next person.
But anything better than a 620 usually indicates that you’re financially responsible and pay your bills on time.
And just because you may not have this minimum doesn’t mean you can’t secure a lease.
There are a lot of variables like the amount of rent, what type of property, and its location as well as many others. You just need to keep looking until you find an apartment that aligns with your credit situation.
Will Paying Rent Build My Credit?
Under ‘normal’ circumstances, no, paying your rent on time doesn’t impact your credit rating at all.
In fact, the only way your rental history impacts your score is when you don’t pay your rent and a landlord needs to place a judgment against you or your wages in order to collect back rent.
But there is one caveat to this. The reason paying your rent on time doesn’t positively impact your credit rating is that a landlord doesn’t report your history to any credit bureaus. If they did, it can help.
So what some people do, especially when they have a limited or negative credit history is to pay a rent-reporting service to collect and report your rent payment information to the correct bureaus on your behalf.
This can help build your report and get you going in the right direction.
How to Build and Improve Your Credit
If you want to do anything these days in relation to finances, it’s really important to have the best credit rating possible. And luckily, there are certain things you can do to help and start building your credit score, here are a few…
Secured credit cards: While these are never the best option because they have dramatically high-interest rates, building credit means you need to get credit. And these secured cards are an easy means to do that. Even though they are secured, as long as you pay your full balance on time every month, they do work towards building a better credit profile.
Personal loans: Personal loans are also a great way to build credit. They usually have lower interest rates than secured credit cards, and you have the money in cash so you can place it in a bank and use it to pay back the bank while also building credit. Crazy, right?
Maintain low credit card balances: Always try to keep your debt to income ratio under 30%. This demonstrates your cards are used for simple expenses, and not a way to live.
Pay bills on time: Every time you pay something late, especially anything related to credit, it all negatively impacts your credit score, so always pay everything on time!
Monitor your credit: You should always know where you stand as far as your credit report goes. You should also be monitoring your credit through Credit Karma or a similar credit monitoring site. You can also request your free annual credit report from the three major credit bureaus (Equifax, Experian, and TransUnion).
Companies can make mistakes too, and you don’t want a mistake to impact your credit score, so always keep an eye out for changes and adjustments to your credit history.
Other Things to Consider
Having stellar credit isn’t all that goes with renting an apartment. There are also a few other things to consider like renter’s insurance, the application process, and speaking with potential landlords.
So to help you be completely prepared, I’ve written out some tips to know on each below:
- Renters insurance: Most landlords do not cover you if you have a break-in or you cause significant property damage. That’s why it’s a very smart idea to get renter’s insurance just in case anything should ever happen. It’s usually affordable and will help make you and your landlord feel more secure.
- Rental application process: When it comes time to fill out a rental application, be prepared and have all of your documentation on hand. This includes proof of income, employment history, and references. It saves both of you time and demonstrates you’re prepared and taking the application process seriously.
- Communication with prospective landlords: Always be straight with a potential landlord. If they find out you’ve lied on your application or even in a personal conversation, this can cause a lot of problems down the road and even potentially void any contracts you agree to. So just be honest and start your relationship on the right foot.
So obviously having great credit can go a long way in improving your chances of obtaining a lease on that perfect apartment. But not everyone has an 800 credit score.
That also doesn’t mean that if you have bad credit or no credit you can’t still get a great place. If you follow the tips in this article, you can still find a suitable apartment to rent.
I am a Certified Lending and Credit Specialist and first gained experience fixing my own credit. My own credit scores went from the 500s to the 800s in one year. I studied economics at The George Washington University and now have my own business working with financial technology companies. I manage my own investments and live in Salt Lake County, Utah with my wife and two kids.