7 Ways to Rent An Apartment With Bad Credit
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You've found the ideal apartment in the middle of the big city. But there's one problem: Financial mistakes in the past have left you with a low credit score. Now you're worried that landlords will reject your application because of those times you paid your credit card bill late or forgot to make your auto loan payment.
There is hope, though. It's possible to rent an apartment even if your credit score is weak. But you might need a little help from a family member, or be willing to pay a bit more rent each month.
It's not surprising that most landlords today check your credit. Your three-digit credit score tells landlords how well you've managed your finances in the past. If you've paid bills late, missed payments, or suffered a negative financial judgment — bankruptcy or foreclosure — your score will be low. A FICO credit score of 740 or higher today is considered an excellent score. Scores of 620 or lower raise red flags.
Don't give up hope if one landlord rejects your application. It helps to shop around with different landlords, said Brent Cotterman, owner and chief executive officer of Financial Rehab in Phoenix.
"Just because you're rejected from one place doesn't mean you will be from all of them," Cotterman says. "Different landlords have different tolerances for risk. It doesn't hurt to apply at four or five different apartments."
If your score is weak, here are some steps you can take to convince landlords that you're still a good risk.
1. Get a Cosigner
The easiest solution is to convince someone — usually a family member — to co-sign the rental application with you. In such an agreement, your cosigner is agreeing to make your monthly rental payments if you fail to do so. This provides protection to landlords wary of renting to someone with bad credit; your landlord will still receive rent, even if you aren't the one making the payment.
Your cosigner will need good credit. But, be sure that you can actually afford your rent. You don't want to put your cosigner in the position of having to pay your rent for you. That's a good way of ruining a relationship!
2. Check Your Credit Reports
Before seeking an apartment, order copies of your free credit reports from AnnualCreditReport.com. You're entitled to order one free copy of each of your reports — the national credit bureaus TransUnion, Experian, and Equifax each maintain a credit report on you — every year.
Once you receive your report, study it carefully. It will list the money you owe on your credit cards, auto loans, and student loans. It will also list missed or late payments. If you spot any errors, correct them. You can do this online with the three credit bureaus. Don't skip this step: Fixing an error on your credit report can quickly boost your credit score.
3. Be Honest
Don't try to hide financial mistakes from landlords; once they pull your credit, they'll find them. Instead, prepare a written note explaining why you missed credit card or student loan payments.
Maybe you briefly lost your job. Maybe you were injured and faced staggering medical bills.
Whatever the reason, explain it in your letter and give it to potential landlords. Make sure to include an explanation for why you won't be missing payments again in the future.
Your landlord might be willing to overlook a weaker credit score if you have an explanation for your past financial missteps.
4. Point to Solid Income
If you have a solid monthly income stream today, you'll be more likely to convince your landlord that you are no longer a risk to miss rental payments. Maybe those missed auto loan payments came when you were working a lower-paying job. Now you have a job that pays you a good salary. Point this out to your potential landlord. Show landlords copies of your most recent paycheck stubs stating how much you are now earning. A solid income might help ease any concerns your landlord has about a lower credit score.
5. Pay a Little More
Some landlords might charge you additional fees — often called risk fees — if your credit score is low. If you agree to pay these higher fees, landlords might be more willing to overlook a low score.
You might also offer a bit more in rent each month to landlords who are wary of renting to you. An extra $50 a month might convince a property owner to overlook your weaker credit.
Before agreeing to pay extra, though, make sure that you can afford the higher monthly payments.
6. Offer a Larger Security Deposit
Landlords might consider you a more attractive renter if you offer a larger security deposit. This makes sense: If you do fail to make your rent payments, your lender will keep your security deposit. If you provide a larger one, your lender is taking on less risk by renting to you and might be more likely to overlook that bad credit score.
7. Start Building Credit
If you do land an apartment even with weak credit, here is some good news: You can now build a stronger credit score by paying your rent on time every month.
Traditionally, landlords have not reported monthly rent payments to the three national credit bureaus. This meant that renters didn't help their credit scores by paying rent on time. That is changing. Experian and TransUnion are now collecting data on rental payments. Renters who pay through online services such as RentTrack and RentReporters can have their payment data sent to TransUnion and Experian. As renters pay on time, their credit scores with these bureaus will steadily rise.
"The one thing that will improve your credit score the most is paying your bills on time," Cotterman says. "So make sure to not pay your bills late. You won't get marked as late on your credit report until you are 30 days past your due date. Every time you hit that 30-day mark, you get a 30-day marker on your report. That will lower your report significantly. So pay your bills on time."
What other techniques have you used for renting an apartment with weak credit?Source: www.wisebread.com