Renting With Credit Challenges

Most people know that it takes a positive credit score to buy a house. Qualifying for a mortgage requires good credit. But did you know that credit is a major factor in renting a place to live? Yes, poor credit can create a major hurdle in the rental process. If you are concerned about securing a place to live, there are some things you can do to increase your odds of approval.

The truth is that some property owners will deny your application to rent if you have any negative items on your credit. This is sometimes regardless of great rental history and good income. You should start by steering clear of these rentals. Begin by trying to find a place that doesn’t check credit at all. A good rule of thumb is to stay away from complexes that are owned by big property management firms. Corporately owned rental complexes generally have the most stringent credit requirements.

Focus on properties that are privately owned. Individual owners renting out their property are more likely to either not check credit at all, or accept a tenant based on more than just credit (like positive rental history and consistent income). Private owners often advertise their rentals in the local newspaper and on websites like Craigslist and For Rent By Owner. Many of these property owners will place “For Rent” signs outside of the rental address, so cruise through neighborhoods in the area you’d like to live. Inquire at as many as possible and be sure to ask what the rental criteria is upfront so that you can filter out those that you know won’t work.

Before filling out any applications, make sure to check your credit report from all three major credit bureaus so that you know exactly what is on your credit. Now is the time to ensure that all of the information reported is accurate. If you find inaccuracies, you can begin a DIY dispute process, or engage the help of a professional to have the errors removed. You should know exactly what is on the report so that you can discuss any issues that may come up with a potential landlord.

Gather as many references as you can. Recommendations from previous landlords, current/previous employers, your banking institution, and even personal references can be very helpful. If there are negative items on your credit report because of a financial problem, such a medical bills or divorce, document them. A letter of explanation describing the situation, and, most importantly, how you’ve worked to remedy it, can help persuade a landlord to trust you as a renter.

Have these handy, but use only if/when the issue of your negative credit comes up. You must give explicit permission for a landlord to check your credit, so you will know in advance if it will be reviewed. Save the reference and explanation letters for this point, should it get there.

Be sure that you have a provable source of income. Many times, good, consistent income can offset a negative credit history. In the case of property rental, sufficient income is usually three to four times the monthly rent. This means if the rent is $800, you would have this part covered if you made $3,200/month. Proof of this is extremely important, so gather three to four months of paystubs. This proves your income is both enough and stable.

Make sure you are prepared financially to pay more cash upfront for a rental. Even people with stellar credit are usually required to provide some sort of security deposit. If you get approved with less than perfect credit, you will likely be made to pay a higher security deposit. This is generally between one and four months of rent up front upon move-in. Start saving for this before you begin searching to maximize your cash on hand.Finally, having a second responsible party can up your chances of getting approved for a rental. If possible, find someone with good credit, who trusts you, to be a co-signer on your lease. Use this option as a last alternative. Remember that this person will be as legally responsible for the lease as you are, so it’s important to be extremely careful with their trust.

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