Review Your Credit Reports
Its important that you check your credit reports regularly to identify any inconsistencies or errors that may be holding your score down. You can get free copies of your credit reports once per year through AnnualCreditReport.com.
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Financial Information In Your Credit Report
Your credit report may contain:
- non-sufficient funds payments, or bad cheques
- chequing and savings accounts closed for cause due to money owing or fraud committed
- bankruptcy or a court decision against you that relates to credit
- debts sent to collection agencies
- inquiries from lenders and others who have requested your credit report in the past three years
- registered items, such as a car lien, that allows the lender to seize it if you don’t pay
- remarks including consumer statements, fraud alerts and identity verification alerts
Your credit report contains factual information about your credit cards and loans, such as:
- when you opened your account
- how much you owe
- if your debt has been transferred to a collection agency
- if you go over your credit limit
- personal information that is available in public records, such as a bankruptcy
Your credit report can also include chequing and savings accounts that are closed for cause. These include accounts closed due to money owing or fraud committed by the account holder.
Can You Rent An Apartment With A Low Credit Score
Landlords want to make sure potential tenants have enough income to handle rent payments, so they might verify employment. And according to the Consumer Financial Protection Bureau, landlords and property managers might do a background check using a tenant-screening agency. Both employment verification and background checks can be important factors in whether an applicant is approved.
âIf the score is close but not quite there, I would look at the application as a whole,â Wallace says. âFor example, a stable income and clean background report help.â
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How To Improve Your Credit Score
So, its clear that a good credit score is one of the more important factors when trying to gain mortgage approval. Since its also a factor in calculating the interest rate youll be given, a favourable score can also save you thousands of dollars over the course of your amortization. Therefore, its best to get your credit score in the best shape you can manage before you apply with any lender. If your score is lower than 600-650, or you would simply like to improve it as much as possible, there are a few simple tricks you can use.
- Paying bills on time and in full
- Do not carry a large amount of unpaid debt
- Use no more than 30% of your available credit card limit
- Dont apply for too much new credit in a short amount of time
- Review a copy of your credit report for mistakes or signs of identity theft
- Consider a secured credit card if youre building from the ground up
Get An Apartment Cosigner
Your landlord will still want to know how he or she will get paid if you cant make your rent. As a solution, they usually ask renters who dont have a credit history to get a guarantor when signing a lease. What is a guarantor? Someone who is legally required to pay your rent if you dont pay.
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Other Accounts Included In A Credit Report
Your mobile phone and internet provider may report your accounts to your credit bureau. They can appear in your credit report, even though they arent credit accounts.
Your mortgage information and your mortgage payment history may also appear in your credit report. The credit bureaus decides if they use this information when they determine your credit score
A home equity line of credit that is added to your mortgage may be treated as part of your mortgage in your credit report. If your HELOC is a separate account from your mortgage, it is reported separately.
Can I Get A Mortgage If My Credit Score Is Low
When we talk about minimum credit scores required to get approved for a mortgage, were talking about conventional lenders, such as big banks. These traditional lenders are usually quite stringent about their mortgage approval requirements, including the credit scores needed for mortgage approval.
There are options for bad credit borrowers who are looking for a mortgage to finance a home purchase. Credit unions, trust companies, and subprime lenders are potential sources for mortgages for borrowers who cant qualify with their banks because of their sub-par credit scores. These sources often deal with people who may be viewed as risky to conventional lenders.
Have you considered a bridge loan to help purchase the home of your dreams?
It should be noted that if you do plan to apply for a mortgage with one of these lenders with a bad credit score, you will likely pay a higher interest rate than you would if you had a higher credit score and applied with a conventional lender.
Thats why its best to consider taking the time to improve your credit score before applying for a mortgage. That way youll have an easier time getting approved for a home loan and clinch a lower rate, which will make your mortgage less expensive.
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What Do Landlords Look For In A Credit Report
Even if you take the other steps to convince a landlord that you are worthy of renting an apartment, you may also have to agree to a credit check. Heres what a landlord may look for on your credit report:
- Rental history: A landlord will be interested to know whether or not youre going to pay your rent every month. If youve rented before, a previous landlord may have reported your payment history to the credit bureaus. If so, any late or unpaid rent or evictions will likely show up.
- Payment history: Payment history accounts for 35% of your credit score, according to myFICO, and is a good indicator of whether or not you will make your payments on time in the future. If youve made a habit of paying late, your potential landlord will likely be very concerned.
- How much debt you have: The amount of debt you owe, which accounts for 30% of your overall FICO score, can indicate your ability to pay future debts. If your credit report details an overload of debt, such as a variety of credit cards and loans with high balances, a landlord may be concerned about your ability to pay.
- Whether youve had a bankruptcy: Bankruptcies can remain on your credit report for as long as 10 years. A landlord may check to see if any amounts owed to former landlords were discharged through bankruptcy, which could be of concern.
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Are Landlords Only Looking At Credit Scores Or The Whole Report
In most cases, landlords are going to look at both your report and credit score. In many ways, your credit score is a summary. It lets landlords know at a glance your overall creditworthiness, and may be used to determine if the rest of your application is worth reviewing.
However, if your credit score doesnt automatically disqualify you from renting the apartment, they are likely going to review the rest of the report.
Generally, landlords will want to review your credit reports for potential red flags, such as:
- Late payments
- Bankruptcy history
- High debt payment amounts
Whether any of those details make you ineligible for an apartment may vary from one landlord to the next. Additionally, there may be state laws that prevent landlords from considering certain information that may appear on your credit report, though this can differ depending on your location.
What Is A Credit Check For Renters
When a potential tenant applies for an apartment and a landlord feels like they could be a good fit, theyre going to run a credit score before starting a tenancy.
This is a normal part of the rental process and typically renters should expect landlords to ask for their information and consent to run a credit check. You can double-check with your local privacy laws to see how youre protected.
A landlord will use a service like Equifax, for example, and using your information they will pull a credit report.
Whats in the credit report will vary, but typically it will show:
- Your credit score
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What Are The Risks Of No Credit Check Apartments
Just as eager as you are to get approved for housing, landlords of no credit check apartments are usually just as desperate to rent out their apartments.
No credit check apartments can be a gamble. The landlord may have issues filling the space if they are a difficult person to rent from. Properties may also have issues in regard to living conditions, or the rental could be a scam.
On your search for no credit check apartments, do your due diligence by researching the properties before you sign a lease.
Rent From An Individual Owner
Most apartment complexes and management companies require a . However, some individual owners will let you rent without established credit.
Generally, these landlords will still ask you to prove income stability. Only rent apartments within your budget, even if you can get approved for a more expensive place.
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So What Credit Score Do You Need To Rent An Apartment
If you research this further online, youll likely find mentions of landlords wanting minimum credit scores of 600 or 620. According to FICO, the company behind the most widely used scoring systems, those scores are within the fair credit range. Thats a bit below average.
That 600-620 is perhaps a good baseline for you to guesstimate the score youll need. If youre looking to rent at the bargain-basement end of the market, you might get away with a fair score. But if youre wanting a swanky penthouse in San Francisco, Manhattan, or somewhere with similarly high rents, youre probably going to need a 740+ score.
Poor Credit Scores Need Not Apply
The average FICO credit score was 689 out of 850 as of 2012, according to the “Credit.com” website. Though there are no formal minimum credit score requirements for apartment rentals, the NJMSC Credit Monitoring Services website says 620 is usually a minimum acceptable figure. However, credit score requirements for apartments vary widely across the country. For example, in 2012 at least one San Francisco landlord was requiring minimum credit scores of 720 from rental applicants.
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The Competitive Rental Market
When I hosted my open house for one of my rentals last fall the demand was overwhelming. Over 50 parties showed up and by the end of the day I had 20 applications on my dining table. Each application contained at least one bank statement, an earnings statement, a letter of reference, sometimes a resume, and of course their latest credit score.
The good thing about so much demand is that I got to be more picky because nothing is worse than having a problem tenant who always complains, makes a lot of noise, and is always late on rent.
Thank goodness I havent had one of these type of problem tenants yet, and I dont ever plan to have one if I maintain a disciplined approach to screening.
With so many applications on the very first day, guess which document I looked at first to screen? The credit score report of course!
What Is A No Credit Check Apartment
A no credit check apartment refers to a rental property that does not conduct tenant background or screening checks. These apartments do not require you to submit the standard application, pay fees, or provide references before you sign the lease and move into the unit.
No credit check apartments work well for both eager renters and eager landlords who are trying to fill their properties. If you are a renter with a low score or no score at all, you can usually get approved for these types of apartments. However, there are risks involved.
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Bring Documents And References
Your credit score is just one part of the story that makes up your consumer profile. If your score is low, submit with your application documents that tell the rest of the story and demonstrate that you are a credible applicant capable of paying your rent every month. Here’s what to bring:
- Proof of a responsible rental history. Bring copies of payments you’ve made for your last rental, if applicable. Your previous landlord may not have reported your payments to the credit bureaus. Bank statements can prove you’ve been on time with your payments.
- Letters of recommendation. Request reference letters from past landlords, property management companies, employers, roommates or business associates. Make sure your reference letters are from credible sources: A letter from a friend or relative who has no experience working with you or receiving payments from you won’t do much for your case.
- Paystubs as proof of employment. A landlord will likely ask for proof of employment. Try to present pay stubs that go back several months, not just a couple weeks, to show you have a steady job.
- Utility payments. Proof you’ve made your utility payments on time every month also shows you’re reliable, dependable and consistent.
S For Improving Your Credit Score
Of course, the ultimate fix for a low credit score problem is to work to improve your score over time. This isn’t a quick process, so have patience with yourself and trust that small, positive actions add up to big, positive changes in the future.
If you’re in debt and haven’t established a debt repayment plan, reach out for help. Use the tools available to you like ReadyForZero! to help you attack and eliminate all your debt.
Once a plan of action for repayment is in place, work to establish consistent money management habits:
- Don’t carry balances on credit cards.
- Make all payments on time each month.
- Pay more than the minimum on debt repayments.
- Pay the full amount on other bills, like monthly credit card statement and rent.
It’s also important that you avoid running up big balances on your credit cards, even if you pay those balances off in full and on time each month. A high credit utilization ratio hurts your credit score.
Stick with these good habits over time, and your credit score will improve. You’ll soon have that good score for renting an apartment — and then some.
Kali Hawlk is a personal finance writer for ReadyForZero, a website for getting out of debt. She enjoys discussing topics like student loans, budgeting, and paying off debt from the perspective of a millennial. You can read more of her work at the ReadyForZero Blog.
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The Proof Is In The Packet
As the Curbed San Francisco website notes, competition for apartments can be stiff, especially in cities such as San Francisco. If you’re in a hot apartment market where landlords are choosy, presenting them with a rental packet you’ve put together could help your cause. Packets presented by rental applicants to landlords should include a credit report that comes with a credit score in every instance. Hopeful tenant rental packets normally also include cover letters, standard rental applications, pet resumes where applicable and income verification.
Check Other Specialized Reports
In addition to credit reports, there are other specialized reports landlords can obtain. The CFPB provides a list of specialty consumer reporting companies that might be used by landlords for tenant screening. Such reports might include criminal history and evictions. Follow the CFPBs instructions to obtain your reports so you can fix them if necessary before applying for an apartment.
TransUnion also offers a rental background check tool called SmartMove for landlords and renters. It also has a resident score feature that factors in your credit history.
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Do Late Rent Payments Affect Your Credit
On the downside, renting can hurt your credit score in some instances. For example, if you’re late on your rent payments, break your lease, get evicted, or fail to pay any move out fees and the landlord reports an unpaid balance to any of the three credit bureaus, that will hurt your credit score. Past due rental balances can also be sent to a collection agency who could report the account on your credit report.
Your credit report might show an unpaid balance that resulted from an eviction, but the actual eviction will not appear on your credit report. Evictions become a public record in your credit report if your previous landlord sues you and a judgement is filed against you.