The most well-known consequence of having bad credit is trouble getting loans or credit cards, but a low credit score can also make it difficult to find a place to live. Landlords, especially large property-management companies, will likely check your credit report before approving your lease, and there are plenty of negative items that landlords see as deal-breakers with potential tenants.
“Any time you’re dealing with any credit issues in the realm of housing, that seems that much more risky to a landlord,” said Ben Papale, a real estate broker in Chicago. Judgments, tax liens, collections accounts on utilities — those items are almost always nonstarters, Papale said, but medical collections and late credit card payments aren’t as problematic, in the eyes of a landlord.
Standards have changed a lot in the last several years, as credit problems became much more common due to the recession, which has also given renters the opportunity to explain the circumstances of their situations.
“A 625 by almost any landlord standard is considered good credit, and that wasn’t the case a few years ago,” Papale said of credit-score standards in the Chicago rental market.
Barry Maher, a property manager in Corona, Calif., said his tenant standards changed significantly during the recession. He said he never looked at applicants with bad credit, because he had plenty of people trying to rent from him whose credit reports were problem-free. Then, all of a sudden, all the applicants had a credit problem.
“I started looking at it more closely,” Maher said. “Particularly after the recession hit I had people who had declared bankruptcy, people who had lost their houses. … I was able to find some incredibly good people to rent to.”
While bad credit is likely to cause problems in your apartment search, there are a few things you can do to improve your approval chances. Maher and Papale shared what strategies tend to work best for bad-credit applicants trying to make their cases to landlords.
Large management companies are less likely to consider applicants with bad credit, so you’ll want to look for a landlord who has a small operation, who maybe owns just a few units or properties.
“They’re a lot more open to considering special considerations,” Papale said. Large management companies are unlikely to make exceptions, because that opens them up to the possibility of getting sued if someone in a similar situation applies for an apartment and is denied, Papale said.
If you’re dealing with an individual, rather than a company, you may have an opportunity to tell your story and explain why you’d be a good tenant.
Make a Personal Appeal
Maher puts a lot of stock in personal interactions. He said he always makes reference calls himself — he said the one time he didn’t led to dealing with a terrible tenant, and he won’t make that mistake again — and he knows there’s a lot of value in meeting potential renters before making a decision.
“If they’re forthcoming and they actually meet with the person making the final decision, if they possibly can, and explain their case, they’re way ahead of the game,” Maher said.
Papale recommends renters with bad credit write personal statements to send in with their applications, to put the credit problems in context and make an argument for themselves.
Offer an Incentive
Personal connections may not be enough to persuade a landlord to look past the risk factors of taking you on as a tenant. If you offer to pay an additional deposit or a few months of rent in advance, that may be the assurance the landlord needs to approve your application.
Maher has worked out a variety of deals with bad-credit applicants, including a recent tenant who helped him out when he decided to sell the house she was renting.
“She was so good I ended up writing a strong recommendation to her,” Maher said. “Because she helped us sell the place, we gave her some money.”
He also accepted an applicant who offered to make improvements to the unit, because he had the skills to do so. Maher reduced his rent and supplied the materials in exchange for the work.
There are some credit problems you can’t outweigh with an extra deposit. Papale recalled having an applicant who “defaulted on everything,” from his cellphone bill to student loans, and he couldn’t help him find an accepting landlord. Maher said he’ll discard an applicant who tries to cover up his or her credit problems.
“They’ll say, ‘I have perfect credit, here’s my credit score,'” Maher said. “I still run the credit check, and it’s an issue.”
It’s important to check your credit scores before applying for a rental, not only so you can address any credit issues you have proactively, but also to make sure you’re accurately representing yourself. Your score fluctuates constantly, so you don’t want to fill out an application thinking everything’s fine and have a landlord think you lied because he found issues with your credit report. You can get two of your credit scores for free on Credit.com, with updates every 30 days.
If you can’t get approved on your own, you still have some options. You can try to find a sublet while you try to improve your credit, and you can ask someone to co-sign your lease. If you have any outstanding issues with a previous landlord, take care of it right away, Papale said. Property managers give great weight to previous rental references, so if you had any problems, that’s something you’ll want to address upfront, as well.
More on Credit Reports & Credit Scores:
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Credit Impacts Your Day-to-Day Life