Spoiler alert: there’s no exact credit score that determines whether or not you’re allowed to rent an apartment. But that doesn’t mean credit isn’t important. Your credit score can either be a major green or red flag to a prospective landlord. However, if you have poor credit or no credit history at all, you might experience some difficulty getting your application approved.
To set you up for success as you begin apartment hunting, there are important details you need to know about how your credit score affects your ability to rent an apartment. From how to strengthen your rental application – even with poor credit – to ways you can quickly raise your credit score, we’ve got you covered.
What credit score do you need to rent an apartment?
Your credit score is a score between 300 and 850 that represents your likelihood of paying bills on time and repaying loans. People with high credit scores are deemed more creditworthy than those with low credit scores.
The minimum credit score to rent an apartment will depend on two main factors. The first is the competition in the local rental market. The more competitive the market, the higher the credit score you’ll need. The type of apartment you want to rent is also a factor, with luxury accommodations requiring higher credit scores than a basic or low-end unit. In the end, every landlord or property management company will have its own thresholds for credit scores.
A recent survey of 5 million renters nationwide found that the average credit score for all renters was 638. Here are the findings for the minimum credit score needed by type of unit:
- Low-end: 597
- Mid-level: 626
- High-end: 669
However, in many cities, average credit scores are higher. Renters will need to compete with others who are more likely to have good or better credit scores. No matter where you live, you may need to compete for a prime unit, and having a high credit score will increase your odds of scoring the apartment you want.
How are credit scores determined?
Credit scores are determined by five factors and each factor has a different weight on your score. Understanding these factors and how they affect your score is the foundation to building a good credit history.
1. Payment history: 35%
When it comes to payment history, it’s important that you’ve made bill payments consistently and on time. While not all bill collectors report on-time payments, nearly all will report overdue payments. The earliest an overdue bill can be reported is 30 days after it was due. After 90 days, overdue bills are sent to collections.
2. Credit utilization and loan balances: 30%
Loan balances are the amounts of debt you owe. With installment loans— loans where the borrower receives a lump sum payment that’s paid back in installments, such as a car loan— the main determinant is the ratio of debt to income. With revolving loans— credit lines that you can withdraw from and pay back repeatedly, such as a credit card— the main determinant is the utilization of the credit line. Maxed-out credit lines have a negative impact on your score.
3. Length of credit history: 15%
Credit history refers to how long your credit accounts have been open. Older accounts with on-time payments and low balances look best. However, don’t worry if your credit history only goes back 1-5 years, it still counts.
4. New credit: 10%
Newer accounts can pull down your score. One new account will have a small difference, but several new credit cards (or what’s considered hard inquiries made on your credit score to open new lines of credit) can drop your score quickly.
5. Credit mix: 10%
Credit mix is the different types of credit accounts you have, ideally, you want a mix of installment loans and credit cards.
Why do landlords like tenants with good credit?
Landlords only make money when their properties have rent-paying occupants. Most landlords rely on rental payments to cover their mortgage, insurance, taxes, maintenance, management fees, and other costs. A tenant who stops paying puts the landlord’s interest at risk.
Reviewing the credit scores of prospective tenants is one way to mitigate that risk. People with good credit show that they have a history of paying bills on time. And while people with good or better credit may have missed a rental payment in the past, they are viewed as less likely to miss one in the future. It’s always easier to maintain good credit than repair bad credit.
What do landlords look for on credit reports?
Landlords look at more than just your credit score. They want to know if there’s any history of non-payment (aka collections) or late payments, especially anything that indicates late rental payments or major credit issues.
Though evictions don’t appear on credit reports, landlords have other ways to uncover a prospective renter’s eviction history. Most landlords will sell unpaid rental debt to a collection agency and a future landlord may conduct a tenant background check that searches public eviction records.
What else do landlords look for in a future tenant?
Landlords value your creditworthiness, but they also want to see a history of being a good tenant. That means no significant disputes or history of serious damage. Many landlords will ask for a reference from your previous landlord. And they’ll want to know what your debt payments look like, including credit card and student loan balances.
They also want to see that your monthly income is steady, without significant breaks, and at least 2-3 times the cost of the rental. You may have to show your pay stubs or bank statements so that they can see how you manage your money or the level of savings you have on hand.
Beyond these important financial considerations, landlords might have additional preferences. For example, renting to a person who lives alone can be more advantageous than renting the property to multiple people, as a single person puts less wear and tear on the property. However, this varies from landlord to landlord.
What you should do if you have low a credit score
If your credit score is low, you should start taking immediate action to increase your credit score. While you may not be able to improve your credit as high as you’d like before you need to move, it’s best to start as soon as possible.
The good news is if you’re apartment hunting with a low credit score, you can make your application stronger by using a few techniques. First, you’re going to want to be upfront with the landlord or leasing representative. Talk to them about your history, how you’ve worked to repair your credit, and how you plan to keep improving it. You should also present them with evidence that you’d be an ideal tenant, despite your score. You can do this by:
- Showing proof of rental payments and recommendations from a previous landlord.
- Providing a recommendation from your current employer, especially if this is your first apartment.
- Showing proof of savings by having at least three months’ rent in an emergency fund.
- Finding someone willing to guarantee your lease and have their information ready (or bring them with you).
- Offering an additional and refundable security deposit.
And, of course, only apply for a unit you can reasonably afford. Ideally, your rent should not cost more than 30% of your income. In some cities, like San Francisco and New York, rent is so high that it’s normal for tenants to pay as much as 50% of their income. But you should still be cautious about spending more than you can comfortably afford on rent.
What about no credit check apartments?
Getting an apartment without having your credit checked is possible. Typically, it won’t be a luxury apartment and, in some cities, it won’t be a mid-range apartment either. So be prepared to forgo amenities.
You should also know that apartments without credit checks often indicate that a landlord cannot find a tenant. This could indicate issues with the unit or the landlord, or scammers who promise homes without credit checks only to disappear after they receive a deposit, so be cautious if you come across this type of rental. There are many other ways to find housing even with low credit. Though it may not be the ideal space with all the desired amenities, it can be a stepping stone while you repair your credit.
How to rent an apartment with bad credit but high income
Renting with bad credit is never easy, but it’s much easier for people with a high income. You’ll want to show proof of your salary and a recommendation from your employer. Plus, you’ll want to have a clear rental history of paying your monthly rent on time. You should also have the extra money in your savings to show you have reserve funds and be able to offer a larger deposit if needed. And you may also want to find a cosigner with good credit.
If you have an issue with debt, try to spend time paying it down before moving if possible. People with high income and high debt, especially credit card debt, will still have some explaining to do. After all, it doesn’t matter how much money you make if 75% of it is going toward credit card payments.
What’s the minimum credit score to rent a house?
Again, the minimum credit score required for a rental depends on the location, how nice or updated the rental is, and landlord preferences. It’s a good bet that anyone with a credit score below 650 will find some difficulty renting a house. People with scores over 700 should not have an issue renting so long as they have the income and savings to cover expenses. And in some cities, people should aim to have scores over 720 to score their dream rental.
How you can improve your credit score quickly
First, you need to deal with any negative marks on your credit report – it may be possible to dispute these marks if you think they’re an error. If you have overdue payments, pay them off as soon as possible. And if you have any payments in collections, address these immediately. You can also send a letter to the company that reported you and ask for your late payment or other issues to be removed.
Next, you should tackle any weak points. For example, if you have no credit cards, consider getting approved for one, or see if you can be added as an authorized user to a credit card owned by a family member if you don’t have good approval odds. Remember that when you’re added to an account, you’ll be treated as if that account belongs to you, so be sure you’re not signing onto a credit line that’s maxed out. While it will take time and effort to increase your credit score drastically, these few things can help boost your credit score in the short run.
What to do if your rental application gets rejected because of your credit score
In most cases, you’ll have the option to sign your lease with the help of a guarantor, also called a co-signer. This person will need to meet certain credit and income requirements, in addition to agreeing to cover your rent payments if you fail to do so.
If a co-signer or guarantor is not available to you, you’ll have to look for other housing options while you build your credit. Renting a room with a person who already has a lease can be a great option. Be sure to vet them and make sure they’re a good fit as a roommate.
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