What Credit Score Do You Need For An Apartment

Build Up Your Savings

Before you move into a new apartment, prepare for your increased cost of living.

If you have the ability to live rent-free with a family member while working from home, take advantage of it by “practicing” paying your rent in the months leading up to your move. Every month, transfer enough money to cover what your future apartment’s rent will be into a savings account. After six months, you’ll have a nice emergency cushion and you’ll have built up the budgeting muscle to know you can afford your future costs.

For this trick, Ally is a good choice since you can do all your banking in one place. While the Ally Online Savings Account is a good high-yield account on its own, account holders can enjoy even more benefits if they also have an Ally Interest Checking Account. If you have an Ally Savings account, you can create 10 different “buckets” within the same account, organizing your money easily. You can create a designated fund for your security deposit and another called “Emergency Savings” where you can stash those practice rent payments.

• Annual Percentage Yield

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• Maximum transactions

  Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

• Excessive transactions fee

• Yes, if have an Ally checking account

Terms apply.

How To Raise Your Credit Score

If you want to raise your credit score before you search for an apartment, here are some quick tips to help you out:

• Pay your bills on time: Consistently paying your bills on time can help improve your payment history, the biggest factor in determining your credit score.
• Pay more than the minimum amount: To improve your credit utilization ratio, aim to pay off the highest amount you can .
• Dont close old cards: Older credit cards can improve your average age of credit, an important factor in your credit score.
• Sign up for a secured credit card: Secured credit cards can help you establish or improve a low credit score for renting an apartment. Secured credit cards report to all three credit bureaus and your history will be included in your credit report.
• Dont shop around: Each credit inquiry you submit is recorded, and too many in a short period of time can lower your credit score.
• Ask your landlord to report on-time payments: If you’re currently renting, ask your property manager if they can report your on-time rental payments to the bureaus.

You might qualify for lower interest rates for credit cards, a mortgage, car loan or even that charming rental in that cute little tree-lined neighborhood if you have a higher credit score.

Understanding The Application Process

Nearly all property management companies will request that you provide a few key documents during the application process that will allow them to vet you as a prospective tenant before handing over the keys to a new apartment. In addition to asking for a security deposit to be paid upfront, conducting a background check, and searching for any prior evictions, property management companies will also evaluate your financial stability.

As part of your application, they will likely ask for proof of income through copies of pay stubs and bank account bank statements, as well as running a report to obtain your credit score. Your current credit score may alert the management team if there are any red flags such as bankruptcy, overdue credit card bills, outstanding loans, and other financial items. While this may seem like detailed information, the process is common and standardized and shouldnt cause alarm. In most instances, potential renters pass with flying colors!

Once your FICO credit score and credit report have been obtained from the main credit bureaus of Equifax, Experian, and TransUnion, the property management team will consider if your score is too low to sign a lease on your own.

So, what is considered good credit and bad credit? And, is there a minimum credit score to rent an apartment? Lets get in to a few more of the details.

Read Also: Where To Check Credit Score For Free

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 landlords 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. Its always easier to maintain good credit than repair bad credit.

What To Do If Your Rental Application Gets Rejected Because Of Your Credit Score

In most cases, youll 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, youll 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 theyre a good fit as a roommate.

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What Do Landlords Look For When They Check My Credit

When landlords check your credit, theyre looking for evidence that youll pay your rent on time. The metrics that they use to do this often vary, but theyll pay special attention to your payment historyspecifically, whether you have any derogatory items like late payments, charge-offs, or collection accounts.

Actions To Take To Get Approved For A Rental

Bottom line: a good credit score for renting an apartment is one over 620. So what should you do to get approved for a rental if your score is under that benchmark?

First, understand that improving your credit score takes time and diligent action. Paying your credit card balance off on time for two months won’t equate to a meteoric rise in your credit score. What will make a positive difference is consistent action over time.

Of course, when it comes to renting an apartment you may not have months to spend patiently coaxing your credit score higher and higher. Consider these actions that can help you get approved to rent an apartment even without the world’s best credit:

1. Review your credit report. Before applying to rent an apartment, request a copy of your credit report. You can obtain a report for free once per year by visiting www.annualcreditreport.com. Ensure your report doesn’t contain errors, which could drag your credit score down and contact one of the three credit bureaus to report a mistake if you do find one.

2. Don’t shop around. Do research before sending in rental applications. Each time someone puts in a request for a hard credit check, that inquiry is recorded. Too many inquiries in a short span of time could push your score down further.

4. Provide additional references. In addition to securing a reference from your current employer, you can also ask for references from past landlords to vouch for a history of paying your rent on time and in full.

Also Check: How Long Can A Debt Appear On Your Credit Report

Whats The Minimum Credit Score To Rent Apartments

While theres no universal credit score to rent apartments, the average U.S. renter’s credit score was 638 in 2020. The credit score you need depends on where you plan to live, and the policies of your landlord.

The Fair Isaac Corporation, or FICO, specializes in predictive analytics. Even though its not the only credit-scoring company available, it carries the most weight when you apply for credit. FICO suggests that a and above is generally more than enough to rent an apartment.

FICO scores range from excellent to very poor:

• Excellent: 800-850
• Very poor: 300-579

Optimize Your Credit Utilization

Firstly, be sure to optimize how your credit is being used. Make sure that you dont have any negative items on your credit report that you arent responsible for and that you dont regularly take-out unnecessary loans or debts.

Remember, your accounts for 30% of your credit score. It is important to understand what impacts your rate and what you can do to optimize it.

Read Also: What Is The Average Credit Score In The Us

How To Improve Your Credit Score As A Renter

As a renter, its important to always practice good credit borrowing habits to increase your credit score. In addition to making on-time payments on your bills and keeping your credit usage below 30%, renters can begin reporting rent payments to TransUnion with rent reporting tools like .

With CreditBoost*, you can contribute to your FICO 9, FICO XD, and VantageScore credit scores for $3.95/per reported month. This can be especially beneficial if you currently have little to no credit and are looking to build a strong credit history through the rent payments youre already making. You can also report your utility payments to a credit bureau or explore credit builder loans if youre looking to improve your credit score without a credit card.

How Long Do Inquiries Stay On Your Credit Report

As weve seen above, soft credit pulls might show up in your rental credit check history, but they dont affect your credit score in any way. They also disappear within 30 days.

On the other hand, hard inquiry credit checks stay on your credit report for 2 years. After this point, they fall off.

For example, If you’ve been turned down for a loan recently, try waiting at least 24 months. After the 2-year period is over, you can apply again so that the previous inquiry will drop off your credit report.

Also Check: How Do You Get An 850 Credit Score

Use Your Rent Payments To Boost Your Credit Score

Once you’ve signed the rental lease, having your landlord report your rent payments to credit bureaus can help you establish credit or improve your credit score. If your landlord doesn’t already do this, see if you can convince them to start, or if they will let you pay via a rent payment service that works with Experian RentBureau.

Finally, be sure to make your rent payments on time and comply with the rules of your lease. Being a model tenant will make it easier to qualify for an apartment or house the next time you want to move.

Lowest Credit Score Needed To Rent Property

A high FICO score on your credit report shows youre good at paying your bills, whether theyre from a car loan or credit cards. But a low score could cause your potential landlord to think you are more likely to miss rent payments. Thats why if youre looking to rent, your credit score is important.

Anything 700 or higher is good, says Wolf. In general, if your score is under 680, you will begin to have difficulties renting.

Credit scores below 600 means an individual probably has at least two collections on their credit report, which means they are a credit risk, adds Chong.

Recommended Reading: How To Boost Your Credit Score 100 Points

Its Not Just When Youre Renting

What credit score do you need to rent an apartment? Consider that even when youre not about to rent or a buy a home.

We tend to think more about credit scores when were facing a big financial event: renting a home or applying for a mortgage, credit card or loan. Its good if you can keep your score front and center whenever you make a purchase or payment.

Thats because a low score can cost you serious amounts of money over your lifetime. One estimate reckons the average cash difference between living a life with excellent credit and one with poor credit is $200,000.

And the effect of low credit can dog you in other ways: by closing off options and opportunities that are open to others. So dont forget your score, even when you dont immediately need it.

What Do Landlords Look For On Your Credit Report

Landlords check your credit for many of the same reasons lenders do: They want to know if you’re likely to pay your bill on time, based on your past history of paying off debt.

In addition to pulling your credit score, landlords may also check your credit report for evictions, bankruptcies, accounts in collections, loan defaults and late payments. Before submitting any rental applications, you’ll want to check your credit report and score. You can do this for free at AnnualCreditReport.com you can also access your Experian credit report and directly through Experian. Looking over your reports and scores will tell you where exactly your credit stands, and will provide clues to what you’ll need to do to increase your scores.

In addition to your credit, landlords may use other types of reports and background checks to screen you as a potential tenant. Tenant screening may also include criminal background checks, a review of your employment history or contacting references. If a landlord has reported your payment history to a credit reporting agency like Experian’s RentBureau, you may have a renter’s credit score that shows whether you’ve paid your rent on time.

Renters in competitive cities like San Francisco, Boston and New York have average credit scores above 700, according to RENTCafé, so you might need to set your sights a little higher if you want to live there.

Also Check: Who Uses Credit History To Determine Credit Score

Improving Your Credit Score When Renting A Home

One attractive thing about credit scoring systems is they place more weight on recent activity than older stuff. So consistently good behavior can quickly push scores up.

Of course, you have to be realistic. Its going to take many years for you to get from a FICO score of 579 or less to 740 or more . But any improvement makes you more attractive to landlords. And it should generally help you to borrow more cheaply and easily when youre ready to buy a home as well.

For a quick hit, you need to do three things:

You may not have the money to completely achieve the first two. Youll likely give your score a boost when you make any improvement.

What Can A Landlord Ask For

Tenants do end up sharing personal information with landlords as part of the application process. So, what exactly are these landlords asking for and are they even allowed?

Privacy laws and local tenancy laws may vary depending on where you live. Typically, landlords are looking for proof of identity, references, and financial information like your income and credit score and yes, theyre legally allowed to ask for this information and run a credit check with your permission. Theyre also obligated to keep your information safe and only use it for verification purposes, meaning they cant keep it in their personal records.

Heres an example of what they would ask you and the kinds of documents you might be expected to share:

• 740 to 799 Very Good
• 800+ Excellent

A credit score of 670 or more is pretty acceptable. Any lower and that might be a red flag to a landlord. However, a credit score isnt the be-all-and-end-all of a renters financial story.

A tenants personality, lifestyle, and trustworthiness are sometimes more important than their credit score. In fact, a credit score is just one chapter in our comprehensive Trust Score rating system.

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Also Check: How To Clear A Judgement On Your Credit Report

How Can I Prepare My Credit For My Rental Application

It typically takes months to see large increases in your credit rating, so the further ahead you can plan, the better. That said, there are some things you can do in the short term to ensure your credit report looks healthy ahead of filing a rental application.

• Lower your credit utilization: Credit utilization accounts for 30% of your credit score. If possible, pay down existing debt before applying for a rental. This will give your credit score a boost, even if just a small one.

• Avoid any hard credit pulls before applying for a rental: Your credit score will typically dip a few points when a hard credit inquiry is performed. With this in mind, donât apply for any credit products right before applying for a rental. If youâre considering opening new accounts, wait until after your rental application is processed.

• Dispute errors on your credit report: If there are errors on your credit report, having them removed could boost your score by a few points. Since it takes a few weeks for errors to be contested and corrected, start this process early.

• Donât close any credit accounts right before applying for a rental: You might be excited about paying off your car or student loan, but closing out these accounts may actually cause a dip in your credit score, especially if they are one of your oldest credit accounts. If possible, wait to close older lines of credit until after securing your rental.