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Whether you’re graduating from college or moving out on your own for the first time, the first action item to cross off your list is to find a place to live. If you have bad credit, what are you supposed to do? Finding a place to rent is the easy part, but it’s the qualifying part that makes it more difficult. How to get an apartment with bad credit isn’t the end of the world, and the Moving Help® Marketplace will provide you with several options.
This Moving Help guide will explain credit scores, what credit score is ideal, why landlords check your credit, and what to do when renting with bad credit.
What Are Credit Scores?
Engineer Bill Fair and mathematician Earl Issac created the credit score, specifically the FICO score, in 1956.
A credit score is a 3-digit number based off numerous factors to help determine how likely you’re to repay borrowed money. These factors include:
- Payment history
- Amounts owed
- Length of credit history
- Credit mix
- New credit
Lenders, landlords, and insurers use this information to assess risk and decide whether to approve you or not.
What Is the Credit Score Scale?
The credit card scale is between 300 points and 850 points. The range goes from Very Poor to Excellent for credit scores. Below is the full range:
- Very Poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very Good: 740 to 799
- Excellent: 800 to 850
The higher the score you have, the better odds you’ll have for approval.
What Is Considered a Good Credit Score?
A good credit score is considered 670 points or higher. The better the credit score, the higher odds of approval will be in your favor.
Payment history and the amounts owed (credit utilization) are the two largest factors for your credit score at 35 percent and 30 percent, respectively.
What Is Considered a Bad Credit Score?
A bad credit score is anything below 580 points. The lower the credit score, the tougher it’ll be for you to get approved.
While new credit, length of credit history, and credit mix are good factors, they only combine to make 35 percent of your score. That’s why paying on time and keeping the amount you owe low is so important.
Why Do Landlords Check Your Credit History?
Landlords and property managing companies check your credit history and credit score to make sure you’re a reliable person who can keep up on their payments.
Landlords want low turnover, so if they can find tenants who are responsible in keeping debt low and paying on time, they’ll more likely to pay rent on time. They also look for red flags such as evictions, bankruptcies, and defaults.
While this is an important factor, it’s not the only factor for you to receive approval.
Do All Landlords Check Your Credit History?
No. Not all landlords will want to run a background check on your credit history.
Most public property managing companies will have a set standard on what they will and won’t approve when reviewing your credit history. This could mean you’ll be less likely to be approved.
If you have bad credit and are searching for apartments, you might want to consider a private landlord. A private landlord will have their own set of procedures and rules. A private landlord might waive a credit check, or they may put more weight onto proof of income, larger security deposit, or asking for a cosigner or guarantor.
What Are My Options on How to Rent With Bad Credit?
You have several options to consider when renting with bad credit. We’ll discuss these six choices below.
1. Be Honest
If you know your credit score is bad, and you know the landlord or property manager will perform a background check, it’s best to be honest and upfront about it before they perform the check.
It’ll give you an opportunity to explain why you have a bad credit score, and what you can show now to prove you can be a reliable tenant. We’ll discuss some of these options more in-depth below, but you could put more money down, pay a larger security deposit, or get a cosigner.
2. Show Your Proof of Income (Paystubs)
Typically, landlords like to see your monthly income be higher than 3 times the monthly rent for approval. Of course, some landlords may accept 2.5 times the monthly rent.
If you have a bad credit score, but you have a strong proof of income, this will help your case in getting approved. It’ll show you earn enough money to pay rent on time each month.
3. Get a Cosigner or Guarantor
If you can get another person, who has a good or better credit score, to sign on as a cosigner or guarantor, this will help improve your odds.
The difference between a cosigner and a guarantor is the cosigner is responsible from day one and has rights to the property. A guarantor is a backup party that’s only liable only if the primary borrower defaults, but a guarantor doesn’t have rights to the property.
4. Reference Letters
Reference letters can be quite beneficial in showing your responsibility, character, and other great qualities. If you can get a reference letter from a previous landlord, your employer, or your college professor, this will help strengthen your odds that your application is approved.
5. Put More Money Down or Have a Higher Security Deposit
Another way to get around bad credit scores is to put down more money upfront or have a higher security deposit. For example, most landlords will require the first month’s rent, the first and last month’s rent, or something else. If you can put down more money than what’s required, it shows you’re responsible.
You also can offer to pay a higher security deposit. This way, if something were to happen, the landlord can count on that extra higher security deposit amount.
6. Find a Private Landlord
The final option is to find a private landlord, who owns the rental unit themselves and aren’t part of a corporation. Private landlords might waive a credit check or put more weight into proof of income over your credit history.
While it might not be as easy to find a private landlord, it’s certainly possible to find them, which will help when trying to get an apartment with bad credit.
Find a Roommate
If you can’t rent an apartment on your own, you might consider finding a roommate. A roommate with a higher credit score can help you with your odds of approval.
Plus, it’s typically less expensive and less rent per person when you rent a two-bedroom apartment with one roommate vs. paying rent by yourself in a studio apartment or a one-bedroom apartment.
Just keep in mind that living with a roommate has its own pros and cons. You’ll share a space with someone else and will have to share responsibilities, learn to get along with each other, and decorate the apartment together.
Find a Room to Rent
You also might want to consider finding a place where you can rent a room. Many people are looking for a roommate to rent a room in their home.
This can even lower your housing expenses even more while you work on improving your credit score.
Build Your Credit
No matter how you end up handling your living situation, you must focus on building your credit. Your credit score will be attached to your hip for the rest of your life.
You can build your credit in many ways. You’ll need to figure out the best ways that work for you and your personal situation.
How to Get an Apartment With Bad Credit Today
While it’s not simple, you can answer the “How to get an apartment with bed credit?” question with a little bit of future planning. Everyone’s situation is different, so you’ll need to figure out what works best in your specific circumstances.
If you’re ready to move out of your home and into your new apartment and you need some help with the heavy lifting, consider the Moving Help Marketplace. The Moving Help Marketplace has more than 7,500 Service Providers who can assist you with loading or unloading, packing or unpacking, and more today.
