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Landlords and property management companies today often perform credit checks on rental applicants. Credit checks are usually part of a larger prospective tenant background screening process. This is one of the various challenges that those with bad credit face.
Ways In Which You Can Rent With Bad Credit
Those with poor credit should create a multi-faceted plan for this challenge. This should involve finding landlords that don’t perform credit checks.
Being prepared with documentation might help counter your poor credit score. For example, having a verifiable income, references, additional up-front money, and more.
First, let’s define what a good or bad credit score is with the following table.
FICO Score Ranges
|800 or more||Excellent|
|740 to 799||Very Good|
|670 to 739||Good|
|580 to 669||Fair|
|300 to 579||Poor|
Look for Landlords That Don’t Run a Credit Check
Today’s interconnected, online environment allows easier access to data than ever. This includes a landlord’s ability to screen applicants before leasing rental units. Tenant screening companies generate reports for landlords which usually include credit checks.
The three primary consumer credit reporting bureaus are Equifax, Experian, and TransUnion. Each of the bureaus now promotes screening services to landlords and property managers. For example, TransUnion’s SmartMove generates a credit, criminal, and eviction history.
Experian explained that a FICO score of 620 is a common “starting point” for landlords. Thus, those with credit scores below that number should locate housing options without credit screening requirements.
Some of these properties might be less desirable. The National Association of Realtors estimates that “mom-and-pop” landlords own 42% of rental properties. Most of these properties contain one to four housing units.
Look for rentals posted on Facebook Marketplace, Craigslist, and local newspaper listings. You can also ask family members, friends, and others in your social network for any suggestions.
Show Proof of Your Salary to Make Up for a Low Credit Score
Demonstrating to a landlord that you have the financial means of paying the rent could help. Provide proof of current employment and your income.
Also consider gathering pay stubs for the past couple of months, which indicates job stability.
Have you been making other verifiable regular monthly payments? Include utility bill statements for the past few months. Bank statements might also represent another means of showing financial stability.
Positive References From Previous Landlords
Do you have a current or previous landlord that could serve as a reference? Having someone that vouches for you is often an effective way of showing credibility.
Always ask your landlord or property manager before providing their name and contact information. They may even write a letter of recommendation for you.
A prior landlord or property manager might have a payment history report that is helpful. Your bank statements spanning the same period might further help verify.
Arriving prepared with these types of documentation may enhance how landlords perceive you.
Pay a Bigger Security Deposit
We know the expression “money talks.” The reason why landlords perform credit checks is largely to reduce their risk.
Data suggests that people’s past behavior is often a good indicator of what’s to come. Those with a good credit history are less likely to default on their lease agreement.
One possible way of appealing to a landlord is by reducing their financial risk. Here, you offer more upfront cash in the form of a larger security deposit.
Lease agreements often require the first month’s rent and a security deposit upfront. This refundable security deposit is often equivalent to a month’s rent.
Consider offering a larger security deposit. For example, if the monthly rent and security deposit are $800, perhaps offer a deposit of $1,000. Assuming you don’t create excessive damage to the unit, you should get the deposit back.
Another option is to prepay a couple of months’ rent.
Explain Your Reason for Bad Credit History
Those with poor credit scores usually have negative tradelines on their credit history. Examples might include several late payments, a collection account, eviction, or bankruptcy.
Good people sometimes have financial problems that result in defaulting on financial obligations. Often what ended as a financial calamity originated from unforeseen circumstances.
For example, perhaps you experienced an unexpected loss of employment. Other examples might include a major health problem, death in the family, or divorce.
Before addressing your credit-related problems, remember the importance of checking your credit report. Reviewing your credit history provides you with the same perspective as a landlord.
You might find that older, negative entries have dropped off your credit history. Except for Chapter 7 bankruptcy, the majority of adverse credit accounts only remain on your report for seven years.
During this review of your credit report, you might also find possible errors. The Federal Trade Commission found that roughly one in five people identify errors. Disputing any errors or mistakes might help your credit too.
Being upfront and honest with potential landlords about past credit failures might help. These appeals are likely most impactful when explained in person. Yet, a written explanation might be necessary if meeting face-to-face is not possible.
Emphasize your commitment to improving your credit and adopting sound budgeting strategies. Bear in mind that this approach is most effective with individual landlords. A large property management company will likely be less receptive and more inflexible.
Find a Co-Tenant
How about considering a roommate? Having a co-tenant in a reasonably priced rental unit could improve overall affordability.
If you locate a roommate with good credit, you might avoid further denials from landlords. Consider a larger rental unit with an extra bedroom so you have ample space.
Have your “soon-to-be” roommate complete the leasing application and simply split the rent. Another option is to find someone with an existing lease that is looking for a roommate.
Perhaps you have a friend or relative that recently purchased a home and has plenty of extra space? Here, you could rent a room from them and help with the expenses.
Another option involves finding a co-signer, generally, a family member or close friend with good credit. This individual acts as a lease guarantor on the rental.
Finding a co-signer might prove challenging, as this individual assumes financial responsibility.
Set Up an Automatic Rent Payment
Offering to set up automatic monthly rental payments might help persuade a potential landlord. Consider using this option in conjunction with another strategy.
Here, the rent payments are automatically sent according to an autopay schedule. The fund transfer occurs electronically from your checking account, like a direct deposit.
Various tools exist for setting up an autopay, and many of these are free. Some of these companies also report rent and facilitate credit card transactions such as Avail, Stessa, and Rentler.
Keep in mind that you must still ensure that your checking account has enough available funds each month before the autopay.
Emphasize That You’re a Clean, Law-Abiding Tenant
Most people are familiar with the saying that “you never get a second chance to make a first impression.” Keep this in mind when speaking with and meeting a landlord or property manager.
Wearing nice attire, being punctual, and making eye contact all help. Like it or not, people form perceptions and make assumptions about you.
Project an image of a friendly, clean, and responsible individual. Doing so might help you overcome the credit hurdle.
During these conversations, ask the landlord or property manager if you could help with any tasks.
Perhaps you could reduce the monthly rent and make life easier for them by performing some work? For example, seasonal yard work or cleaning laundry rooms or other shared spaces.
Rental applicants with bad credit should understand their rights regarding tenant screening reports. If denied for a rental based on a background screen, tenants may access the report. The landlord must provide you with the name of the screening company so you can get a copy.
What’s the Lowest Credit Score a Landlord Will Accept?
No fixed “minimum credit score” requirement exists for renting an apartment. Landlords check the credit of rental applicants to assess their dependability and creditworthiness.
The credit score standards of a landlord might vary based on the market demand for rental units. Other variable factors might include the neighborhood, the condition of the property, and more.
Experian reported that the average renter in the U.S. had a credit score that averaged 638. Bear in mind that your credit score alone might not represent the only consideration.
For example, a landlord will likely find a prior eviction on your credit report very concerning.
Can You Rent With a 500 Credit Score?
Both FICO and VantageScore are the two primary credit scoring models. Both models indicate that a credit score of 500 is poor.
Further, Experian explains that individuals with a sub-579 credit score pose a risk. They estimate that 62% of these individuals will become “seriously delinquent” on a future credit obligation.
Can you rent with a 500 score? Yes. Yet, most landlords that perform credit checks will deny these applicants.
Here, a consumer should consider making concessions. For example, offer a larger security deposit or have written verification of employment and income.
Can I Rent With a 300 Credit Score?
Rental applicants with 300 credit scores should expect denials in any tenant screening process. A director of the National Landlord Association confirmed this assumption. He explained that “most” landlords look for credit scores above 600.
With a 300-credit score, you should look for rentals without a credit check requirement. Find individual landlords rather than pursuing rentals with a large property management staff.
You should also begin focusing on a strategy for building your credit.
In the meantime, you should consider alternative measures. For example, finding a roommate with good credit or a willing co-signer.
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Anthony Amodeo is a regular finance writer in both business-to-business and business-to-consumer industries. Particular areas of focus include personal finance, small business, real estate, and more. He is a graduate of Kent State University. His credit scores are top tier.