We naturally expect that credit will be issued when applying for a mortgage to buy a house. But it can also matter when it comes to renting. A bad credit score can affect leasing an apartment, and often in ways that aren’t obvious.
Most Landlords Will Check Your Credit
Just as is the case with mortgage lenders, and virtually all creditors, most landlords will check your credit. This is especially true for applying for an apartment in a large apartment building or garden apartment complex. These projects are typically either owned or run by professional apartment developers, or by management companies that specialize in running apartment complexes.
Since they are generally large-scale operations, they will have a standard investigative procedure that they will use to screen prospective tenants. This will include, at a minimum, a criminal background check and a credit report.
Some may be looking for a specific minimum credit score, while others may mostly scrutinize the information contained in your credit report. They may, for example, ignore 30 day late payments on small loan accounts, but look very closely at more significant obligations, such as your payment history on your auto loan. They may also look for a pattern of charge-offs and collections, or even judgments.
The point is, apartment complex consideration of credit is not as standard as it is in other industries, such as mortgage lending. You usually don’t need to have spotless credit, but your credit should not be in the poor categories nonetheless.
What if You Have Bad Credit?
If you do have bad credit, it will limit where you will be able to get an apartment. Some complexes may give greater weight to credit, while others may emphasize income and employment stability. You may be limited to the complexes that are more lenient toward credit.
But even if a particular apartment complex or management company is more lenient in their view of credit, there are a couple of credit related situations that you need to be aware of:
The non-reciprocal rent dilemma. As a rule, landlords do not report your rental history to the credit bureaus if you pay on time. But the opposite is NOT true! They will report an unsatisfactory arrangement! That means, unfortunately, that a rent reference on a credit report can only work against you.
The worst entry to have on your credit report if you’re apartment hunting. Landlords don’t usually report payment histories to the credit bureaus, but what they do report can be even more devastating. If you owed any money to the landlord when you vacated the property, and did not pay it, it will be reported on your credit report as either a charge-off, a collection, or even a judgment.
This is the worst entry you can have on your credit report when you are apartment hunting. It is a signal to landlords everywhere that you may be a problem. While a landlord may overlook a pattern of late payments on various loans, they won’t ignore the fact that you may have burned a previous landlord on the way out.
Clean Up Your Credit in Advance
If you plan to apply for an apartment, you should get a copy of your credit report at least a couple of months ahead of time. That will give you a chance to review your report, and see if there may be any damaging information on it.
If there is, you need to take action to clean it up as much as possible. That may include disputing erroneous late payments and paying off past due balances. This is of course particularly true in regard to any past due balances owed any previous landlords.
If you don’t owe it, dispute it. And if you do owe it, or your efforts at disputing it are unsuccessful, you should pay it off. A paid past due balance is always better than one that is still outstanding. And sometimes, under certain circumstances, you may be able to settle a past due balance for less than the full amount due.
Strategies to Offset Bad Credit
If you do have bad credit, and you want to enable yourself to be able to apply to as many apartments as possible, there are some strategies you can use that may offset your credit situation.
Provide copies of canceled rent checks. Since credit reports will not reflect a good payment history on rentals, you can strengthen your application by providing copies of canceled checks. These can be either on your current rental or on a previous one. You should be prepared to provide a minimum of the payments for the most recent 12 month period.
This will show a nervous landlord that even if you have been less than conscientious about paying your other bills, you can be counted on to pay your rent. Also, copies of canceled checks are stronger than a landlord referral. It’s known in the industry that some landlords will give a bogus good report on a bad tenant just to get them out of the place.
Copies of paystubs, W2s or income tax returns. Some large apartment complexes may require this information anyway. But if they don’t, be prepared to supply it. A solid, stable income can go a long way toward qualifying you for an apartment that your credit won’t.
Verification of your employment history. Stability is an important characteristic for landlords. If you can document several years of work history, it may help to convince a landlord to accept your application. You can often do this by using W-2s and old pay stubs that show a pattern of long term employment.
Offer to put up additional security. If the landlord requires a security deposit of $1,000, offer to provide $2,000. Nothing says that you are serious more than extra cash.
Prepay extra rent. If you can pay an extra month or two of rent in advance, this can assure the landlord you’re good for the money.
Get a cosigner or co-tenant. Not all landlords will accept a cosigner, since there will be a legal process in order to get that person to cover what you don’t. But it’s still worth a try. Better still, bringing a co-tenant into the lease could help offset your bad credit profile. A landlord may be more comfortable with this arrangement since the additional tenant will actually occupy the property.
Rent from an individual. Though large apartment complexes will usually run your credit report, many individual landlords will not. They will rely more heavily on your income and employment, as well as your security deposit. This may enable you to bypass a credit check entirely.
Copies of bank statements. Nothing says “financial stability” more than a strong asset base. If you have a large savings account balance, investment accounts or a well-funded 401(k), supply statements to the landlord. This will show that you have the resources to meet your rent payment, even if you were to face an income disruption.
Why You Need to Fix Any Credit Problems You Have
Getting an apartment when you have bad credit is as difficult as it is to get anything with bad credit. Though you may succeed in getting this next apartment, it may be a different story the next time around. For that reason, and to maximize the number of potential rental opportunities available to you, you should do whatever it takes to improve your credit going forward.
If your credit problems are across-the-board, you may need to consider bringing in professional help. A company that deals with credit problems can do a lot to clean up your credit in the shortest amount of time, and for the least amount of money.
The whole point is to make sure that you’re ready the next time around. And then you can apply for an apartment without having to worry about your credit being an obstacle.