Finding a new place to rent can be an exciting experience, but it’s important to keep in mind that your credit score can play a significant role in the rental approval process. Besides receiving the security deposit and knowing your gross monthly income, landlords want to ensure that prospective tenants have the ability to pay rent and make utility payments in a timely manner. A good credit score can be seen as proof of this capability.

While a credit score may not always be a strict requirement, it can certainly increase your chances of securing the rental property you desire. With this in mind, you should be aware of how your credit score can impact the rental process. However, before moving ahead to rent an apartment, it’s wise to have adequate knowledge about credit scores, credit history, security deposit, and fair credit.

You should also know whether you really need a credit score to assure your landlord that there will be no missed payments.

Let’s dig deeper into everything in detail.

What Exactly is a Credit Score?

A credit score is a numerical value (usually ranging from 300 to 850) that assesses your credit worthiness. When considering your application for a new account, creditors and lenders take into account your credit score as one of the factors in their decision-making process.

In assessing rental applications, landlords might be interested in knowing about the available credit, as well as credit card payments. Having knowledge about their tenants’ good credit score helps them shortlist the most reliable applicants who can pay rent without any delay.

Do You Need a Credit Score to Rent an Apartment?

There is no specific minimum credit score required to rent an apartment. However, some landlords prefer a higher level of credibility before accepting rental applications. They might want to know your credit score beforehand so they can make a decision accordingly. That is why they’d prefer to get into a credit check and evaluate your credit scores before moving forward.

It is wise to collect your credit reports from credit bureaus so you can show your credit history to potential landlords. That way, there are higher chances that your rental application will be accepted.

How Credit Score Affects Renting an Apartment

As financial circumstances change, the credit scores also change. So, understanding the impact of various factors affecting the credit score will help you work towards improving it over time:

• Payment history is the most crucial element in calculating credit scores. A single missed payment can significantly lower the score. Landlords want to ensure prompt monthly rent payments when considering you.
• High credit utilization may be a warning sign to creditors that you have excessive reliance on credit. It gives an insight into how much of the available credit is being utilized, indicating the dependence on non-cash sources.
• Length of credit history considers the age of the credit accounts. A longer credit history tends to result in higher credit scores.

Excessive Credit Applications in a Short Period Can Be Troublesome

Each time a credit card issuer assesses your credit report for a loan decision, a hard inquiry is recorded in your credit history. These inquiries remain in your file for two years and can temporarily lower your score. Lenders assess the number of hard inquiries to determine how much new credit you are seeking.

A high number of inquiries in a short time frame may indicate a pressing financial situation or being denied for a secured credit card.

How to Evaluate Your Credit Before Renting a Home

When searching for a rental property, it’s essential to understand the role that your credit score can play in the approval process. The specific credit score required for approval can vary depending on the landlord, property, and location. However, having a clear understanding of your credit score beforehand can give you a better idea of the properties you’ll most likely qualify for.

Before you begin your rental search, you can obtain a free copy of your credit report and review it for accuracy.

What the FICO says

The following is a general guide of credit scores according to the popular FICO Score model:

●        Exceptional: 800 to 850

●        Very Good: 740 to 799

●        Good: 670 to 739

●        Fair: 580 to 669

●        Very Poor: 300 to 579

If your credit score falls within the “Good” to “Exceptional” range, you can feel confident in your rental search. However, if your score is “Fair” or “Very Poor,” it doesn’t necessarily mean that you won’t be able to find a rental property. You may just have to consider alternative approaches to increase your chances of success.

What if You Don’t Have a Good Credit Score?

It is wise to always avoid bad credit by maintaining your credit history so that landlords can be sure that you can make rental and utility payments on time. With that said, you don’t have to be pessimistic while submitting your rental application if your family member or you have a low credit score. You can explore several options for obtaining the landlord’s approval despite a lack of credit history or unfavorable credit score.

Besides finding out what you need to rent an apartment, the following tips will help you find the right apartments for rent and make monthly payment even with bad credit:

Demonstrate Financial Stability Through Income or Savings

If you lack credit history, you may still be able to rent an apartment by showing stability in your income that’s sufficient to cover the rent. Rent should not exceed one-third of your take-home pay. Alternatively, having a substantial savings balance in your bank account can help persuade most landlords about your stable income.

You should also know how much money is required to rent an apartment. The amount required may vary, but should be enough to cover multiple months of on-time payments.

Seek a Private Owner (but be cautious of fraud)

Renting an apartment from an individual property owner or family-owned property management usually involves a credit check; but some individual landlords might rent without going through the credit checks. That is mainly possible if you can demonstrate financial stability by showing the right financial documents. You can also offer a month’s rent upfront to build trust.

Though this seems to be a smooth process, you should be wary of affordable rental listings that appear too good to be true. Therefore, it makes sense to stay away from scams. Consumer reporting agencies warn about the red flags for rental scams.

How to Stay Away from Scams

It is important to keep in mind the following points while improving your bad credit:

• Never make advance payment for security deposit without touring the apartment.
• The owner might be out of the country with a representative handling the rental. Be wary of sending money overseas and make sure to inspect the apartment before committing.
• The owner might request a wire transfer (which is equivalent to giving cash and can’t be recovered). In this case, it’s better to select another payment method that’s more secure and reliable.

Win the Landlords’ Trust Through Reference Letters and a Larger Security Deposit

It is believed that individuals who are reliable in their professional and educational settings are more likely to be financially responsible. Reference letters are a useful tool to show your commitment to make on-time rent payments if you have a rental history.

You can demonstrate your responsible nature to potential landlords by presenting reference letters from previous employers, teachers, or professors.

Also, landlords may consider tenants with low credit scores if they provide a larger security deposit. By paying several months of rent in advance, the landlord’s worries about your bad credit can be relieved.

How to Improve Your Credit Score for the Long Run

Enhancing your credit score is achievable once you comprehend the reasons for its low rating. While it may require time and effort, establishing responsible habits now can lead to a better score in the future. This can also help you in getting your rental applications accepted when you plan to rent another apartment.

An initial step to establish credit history that’s also worthwhile is to obtain a free copy of your credit report and score so that you have a clear understanding of your credit history and credit builder loan. After that, you can concentrate on the factors that are lowering your score and take actions to address them.

Raising Your Credit Score

Here are some frequently recommended steps to raise your credit score:

• Making timely payments on all bills as payment history is the most crucial factor in determining your credit score
• Decreasing credit card balances to lower your credit utilization ratio and maintain credit limit
• Catching up on any past-due payments as late payments can have a significant impact on your score
• Challenging inaccurate information on your credit report to correct mistakes that may be lowering your score
• Minimizing new credit applications to reduce the number of hard inquiries in your credit file

The Takeaway

There isn’t a specific credit score that guarantees approval of the credit check. However, a good credit history generally indicates a record of responsible credit management, which can give potential landlords more confidence when evaluating a new rental application.

Ensure that you make timely rent payments and follow the conditions of your rental agreement. Demonstrating responsible tenancy will increase the chances of getting your rental application approved.