How to Rent with Bad Credit

You spend weeks looking for the perfect apartment, and you finally find it. It has everything you want in a rental, and most importantly, it’s in your price range. You just need to get approved, sign the lease, and take the keys. The apartment is practically yours.

  • Thursday, August 22, 2019

  Credit Repair   

You spend weeks looking for the perfect apartment, and you finally find it. It has everything you want in a rental, and most importantly, it’s in your price range. You just need to get approved, sign the lease, and take the keys. The apartment is practically yours.

You provide the landlord with your information and keep your phone nearby, awaiting the call. The landlord’s number finally flashes, and you squeal with happiness. Maybe you can sign the papers this afternoon and move in tonight. This is going to be the best week ever. But you know something is off as soon as the landlord asks to speak to you. His voice is flat and unenthusiastic. He doesn’t sound like a person about to make some money.

“I have some bad news,” he says, confirming your thoughts. “You didn’t pass the credit check. You can’t get the apartment.”

And just like that, your hopes are dashed. You didn’t even realize you have bad credit, and now, it’s keeping you from getting an apartment.

You didn’t even know that landlords look at credit scores when screening tenants. Landlords look at credit reports for a variety of reasons. They want to see if you have any prior evictions and if you pay your bills on time. Landlords also want to know if you have a high debt load that will make it difficult to set aside money for rent. All this information paints a picture that lets the landlord know how likely you are to pay your rent on time (Castro, 2018).

While most landlords check your credit report before letting you sign a lease, that doesn’t mean you can’t find a rental with bad credit. Follow our tips so you can get a rental property, even if you have bad credit. Then learn how to improve your credit score, so you can land the rental of your dreams!

Begin by Checking Your Credit Score

Landlords set guidelines regarding credit scores. Most landlords will accept renters with credit scores of at least 620 (Guerra, 2018). However, some landlords set higher minimum requirements, especially in hot markets. If the market is hot, you can expect landlords to have a minimum of 700. This is often considered a safe bet for tenants. 

Begin the process by checking your credit score. This will give you a good idea of where you stand with landlords.

Be Up Front

Imagine this. You know you have terrible credit, and you also know that a potential landlord is going to check it. You’re embarrassed, so you don’t say anything. The landlord verifies your credit, gives it one look, and gives you that dreaded call that you can’t get the rental.

Now, picture this. You talk to the landlord before running the credit check. You explain your credit issues, so the landlord isn’t surprised when the score comes back. The landlord is more willing to work with you because he or she knows that your credit is bad.

This tactic is more likely to work if your credit is bad due to extenuating circumstances. For example, if you lost your job during a recession or you got behind on your student loans, the landlord might be willing to take you on, especially if your credit report doesn’t have any other bad marks. On the other hand, if you pay your bills late every month and are in collections for various accounts, it will be more difficult to explain your issues away.

It goes down to one thing. If you can show that you have experienced rough patches but aren’t chronically irresponsible, it will be easier to find a rental (Tsosie, 2019).

Show Progress

When you’re upfront about your credit issues, it’s also wise to show your progress. Maybe you’ve been paying down your medical bills or working on those student loans. Show the paperwork or bank statements that prove you’re trying to right the ship. Many landlords will see this as an act of good faith. They will realize that you aren’t running from your debt. This will make them more likely to extend an offer to you.

Get a Cosigner

If you have bad credit, you can still rent a house or apartment with the help of a cosigner. A cosigner is someone who signs the lease with you. This person doesn’t live in the house or apartment but is responsible for your rent if you don’t pay it. The landlord notifies the cosigner if the rent payment is late. Then the cosigner must pay the past due amount to protect his or her credit. If the cosigner refuses to pay the rent, the default will go on his or her credit report as well as yours.

If you decide to use a cosigner, it’s critical to find someone who has better credit than you do. Most landlords require that cosigners have a minimum credit score of 700 (Webb, 2018). While some landlords will accept cosigners with lower credit scores, you are likely to get the rental if you can find someone with a credit score of at least 700.

Keep in mind that some people won’t be willing to cosign with a handshake agreement. You’re asking someone to use his or her credit as collateral, and that is a big deal. Consider signing a separate agreement with the cosigner. This agreement should explain that you are responsible for the debt. If the cosigner has to pay any rent, you are on the hook to pay the cosigner back. You might even consider adding interest to make the deal more enticing.

Be Willing to Pay More Up Front 

Most landlords charge the first month’s rent and a security deposit upon moving in. If you have bad credit, your landlord might overlook your low credit score if you pay more money upfront. Instead of just paying the standard fees, offer to pay up to six months of rent in advance. If you can’t swing that, then paying a larger security deposit might help you get the rental (Torabi, 2011). Many landlords expect renters with bad credit to pay double the security deposit, so be prepared to hand over lots of money. It might sting a bit at first, but remember, you will get your security deposit back as long as you keep the rental in good shape.

Talk to the landlord about how much he or she would be willing to take to overlook your credit. Most landlords will want quite a bit extra to cover costs in case you default. However, if you have the money in the bank, this is a good way to get a rental.

Show Your Savings

What if you have lots of money, but you don’t want to hand it over to the landlord when you move in? Some landlords are willing to rent to people with bad credit if they have lots of money in savings. This proves that the potential tenant has extra money to pay the rent. If you have more than the normal amount in savings, print off your bank statement and show the potential landlord. That might be enough to get you into the rental.

Pay a Higher Amount Each Month

Some landlords will accept tenants with bad credit if they agree to pay extra each month. The extra amount is tacked onto the rent and needs to be paid each month without fail.

For example, assume that the rent is $2200 a month. The landlord might be willing to rent to you if you agree to pay $2300 a month. The extra $100 a month will reduce the risk that the landlord takes on by renting to a tenant with bad credit.

If you pay on time for the duration of the lease, you can negotiate when it’s time to sign a new lease. At that point, the landlord should realize that you’re responsible and can be trusted to pay the rent. You shouldn’t have to pay extra any longer.

Get a Roommate

Do you want to land the rental of your dreams, but you have bad credit?  Find a roommate with good credit. Your roommate can go through a credit check and sign the lease, and you can sublease (Chorpenning, 2018). Your roommate will be the master tenant, and you will be the sublessor. You will pay the rent to your roommate, and he or she will pay it to the landlord.

You need to protect yourself if you go this route. Sign a sublease agreement before you move in. This agreement protects the master tenant and the sublessor. You also need to make sure the landlord knows that you are a sublessor. You don’t want the landlord to kick you out in six months because the master tenant was hiding the arrangement.

Also, be careful when selecting a roommate. A good credit score isn’t enough to make someone the perfect roommate. Spend time with the person to make sure you gel before signing on the dotted line. See how the person lives to determine if the two of you are compatible. Is the person messy and you’re a neat freak? It won’t work out. Does the person fly through the door at 2 a.m. every night, and you like to be in bed by 9 p.m.? It might not be a good fit, especially if the person is loud.

After you are confident that you’ve found the right roommate, sign the paperwork and move in. Pay the rent on time every month, and when the lease is renewed, you might get on the master agreement.

Rent From an Individual

Large companies usually have inflexible rules. For instance, a large company might decide that all tenants must have credit scores of at least 680. That is a hard rule that cannot be changed, regardless of the circumstances. If you try to rent from such a company, you won’t get the apartment or house.

You can avoid this problem by renting from an individual instead of a company ( Staff, 2018). Individuals are usually more flexible with the rules. Some don’t run credit checks at all, and others are willing to discuss your credit issues with you. If they believe that you’re normally responsible but fell on hard times, they might look the other way and forget about your low credit score.

Offer to Get Renter’s Insurance

While landlords want their tenants to get renter’s insurance, most renters don’t get it. Only 40 percent of renters have renter’s insurance policies. Compare that to 95 percent of homeowners with home insurance, and it’s easy to see there is a gap in the market (Marquand, 2016).

Most people only see renter’s insurance as a way to protect the renter, and it certainly does that. A renter’s insurance policy will cover your belongings if disaster strikes. For instance, if your property is burned in a fire or ruined in a flood, your policy will replace your belongings. It will also pay for a hotel room after the disaster.

It also protects the landlord, though. If you don’t have renter’s insurance, your landlord could be on the hook for a variety of issues. For instance, if your dog bites someone, your landlord could be liable to pay. The same is true if your guest gets hurt on the property. However, if you have renter’s insurance, your policy will cover the damages, and your landlord won’t have to worry about it.

Offer to get renter’s insurance to give your landlord peace of mind. He or she is much more likely to rent to you if you get an insurance policy, even if your credit is less than stellar.

Have a Solid Income

Landlords usually check the rent to income ratio when screening tenants. Most landlords will only select renters that have an annual salary that is at least 30 percent more than the monthly rent. You are more likely to get approved for a rental with bad credit if your rent to income ratio is higher. If your annual income is 40 to 50 percent more than the monthly rent, the landlord will feel more confident that you can pay. That might mean you have to find a cheaper rental than you want. Just remember that rentals are temporary, though. Once you rebuild your credit, you can get a more expensive rental or even buy a home if you want.

Keep in mind that you can’t just tell the landlord that your income is high. You need to prove it. Show bank statements or pay stubs that reflect your income. The farther back you can go, the better. It’s wise to show the landlord that you’ve been making this amount for quite some time. A high, steady income will put the landlord at ease. He or she will know you can afford the rental property, so you will be more likely to get the keys.

Show Proof of Payments

Did you know that some of your monthly payments don’t show up on your credit report? For example, cell phone and utility companies don’t normally report to credit bureaus. These companies only report when people fail to pay. Show the potential landlord proof of payment for all these bills. This will show the landlord that you normally pay your bills, even though your credit problem got a bit out of hand (Hipp, 2016).

Sign a Short-term Lease as a Trial Period 

Potential landlords might not be willing to provide you with a year lease. They are afraid that you’ll pay for a few months and then stop. Then they will have to evict you and find someone else to fill the property.

If the landlord isn’t willing to offer you a standard lease, ask him or her about a short-term lease. Not all landlords will be willing to offer short-term leases since they will have to extend the lease when the period is up or find a new tenant. However, if the rental market is slow, a landlord might agree to a short-term lease to fill the property and allow you to prove yourself as a reliable tenant.

Short-term leases usually have higher rents. Also, when the lease is up, the landlord can change the terms and charge more once again (Eberlin, 2019). Still, this is a good option if you need to build trust with your landlord.

Rent in a Less Competitive Area

Big cities are usually highly competitive regarding rentals. Landlords usually get numerous applications for a single rental. It will be hard to find someone willing to rent a property to you in a competitive area if your credit is poor. Instead of extending an offer to you, the landlord will choose a more qualified renter. However, if you extend your search outside of the popular areas, you might have more luck securing a rental with bad credit (Schweizer, 2019). The areas outside of the big city are usually less competitive, so you are more likely to land a rental.

You might be worried about living outside of the city due to the commute. However, you can also save money on rent when you live outside of the city. That can make your rental more affordable, even if you have to commute each day to work. Then, if you build up your credit, you can consider moving back to the city if you wish. However, at that point, you might be happy with living outside of the hustle and bustle of the big city.

Rent During a Less Competitive Time

Rental demand is much lower during the winter months. During this time, landlords often offer discounts to get people into vacant apartments and houses (Angulo, 2018). If you have bad credit, you can use the lack of demand to your advantage. Landlords who normally want tenants with credit scores of 700 and above might be willing to let it slide if you have a solid income and rental history. Just be up front when talking to potential landlords. You will find out how important credit is to them in the beginning. If they are willing to work with you, you can begin the application process.

Choose an Apartment Over a House

The qualifications for renting a house are usually stricter than those for renting an apartment. You are more likely to get into a rental with bad credit if you choose an apartment. As you browse through the apartments, read the list of qualifications. Some listings might even state that a credit check isn’t necessary.

Set Up Automatic Payments

“The check’s in the mail.” Those might be the most annoying words a landlord ever hears. When someone says, “The check’s in the mail,” what they are really saying is, “I am trying to scrounge up the money. The check isn’t in the mail, and in a week, I’ll probably say the post office must have lost it. I’ll finally get around to paying the rent in a few weeks.”

Even though landlords know the five words are false, people keep uttering them. Agreeing to automatic payments can help you get a rental, even if you have bad credit. Your landlord will be happy to automatically deduct the payments each month. This will provide some extra security and help you build trust with your landlord.

Bring References 

References can help you secure a rental if you have bad credit. You should consider two types of references. First, get references from your current and past landlords. These references should include your payment history, the length of time you stayed at the property, and your qualities as a tenant (i.e., kept the property in good condition). Make sure your current and previous landlords also provide contact information so your potential new landlord can call or email them.

Next, bring references from employers. You need to prove that you are a high-quality, trusted employee. Have your employers provide information about the length of time at the job and your dedication and reliability. This will illustrate you take your obligations seriously and you have a steady income.

Show Rent Receipts

Are you having trouble getting references from landlords? If so, bring rent receipts with you. These receipts provide potential landlords with your payment history. Landlords want to be paid on time. If you can demonstrate that you’ll do that, you’re more likely to get the rental.

Get a Recommendation From a Current Landlord

Landlords are part of a big community. Many landlords know and trust one another. If you have a great relationship with your current landlord and you’re moving because the lease is up, he or she might help you get into another property. Ask your current landlord if he or she has any contacts with landlords in an area that you want to live. If so, your landlord might set up a meeting on your behalf. The relationship between the two landlords could help you get into a rental.

Offer to Move in Immediately

Landlords don’t like to keep property sitting empty for long. They have to pay the mortgage and utilities, and this adds up. If a property needs to be filled, the landlord might overlook your credit problems if you can move in right away. For example, if you can move in tomorrow and most people can’t move in for at least two weeks, the landlord might work with you. This is especially true if you offer to pay extra as well. Between the extra money and the fast move in, the landlord will likely be happy to work with you.

Find a Fixer-upper and Offer to Help

You might have bad credit, but do you have something that the landlord needs? Maybe you have amazing handyman skills, and the apartment or house could use some work. Try to negotiate a deal with the landlord. If he or she lets you rent the property, you will fix it up. Have the landlord provide the materials you need and then get to work. This is a win-win situation for tenants and landlords. After you do some good work, you can likely live in the newly renovated space at an affordable price.

How to Improve Your Credit 

Even if you find a rental with bad credit, it’s wise to build your credit up. A good credit score can help you get more favorable terms on your rental contract. For example, you can pay a lower deposit and less rent each month if your credit score is good. Also, a high credit score will allow you to become more selective when choosing rental properties. You won’t have to worry about avoiding competitive areas or looking for a landlord that doesn’t check your credit. Instead, you can choose the rental of your dreams.

Follow some steps to start building up your credit.

1. Remove Errors From Your Credit Report

More than one out of every five American consumers have a “potentially material error” on their credit reports. This error makes the consumers look like they are a higher risk than they actually are (Klein, 2017). A simple error could cause you to pay more in rent each month or get denied a house or apartment. Fortunately, this problem is easy to fix.

You can get one free credit report each year. You should pull your free credit report and look for errors. If you find any, dispute the errors with each credit bureau. The errors will be removed from your credit report, and your score will go up.

2. Reduce the Amount of Credit You Use

Credit utilization refers to your balance to limit ratio (Irby, 2019). For example, assume you have a credit card with a limit of $1,000. You charge $100 on the card. Your credit utilization for that card is then 10 percent.

Credit utilization makes up 30 percent of your credit score. You can improve your score quickly by paying down the debt. Your credit utilization should be at 30 percent or less. Anything higher will hurt your score.

If your credit utilization is too high, you can ask for a credit card increase. This will give you a higher limit, so the utilization will not be as high. You can also make micropayments throughout the month. Even if you just have an extra $15, put it toward a credit card so the balance will begin to go down. Pay off your debt as quickly as you can to reduce the utilization.

3. Make Your Payments on Time

Your payments make up 35 percent of your credit score. You want to make your payments on time 100 percent of the time. If you miss the due date by at least 30 days, the creditor can report the delinquency to the credit bureaus. However, each creditor a policy, and some only report the delinquency after the payment is 60 days late (Irby, When Does a Late Payment Go on Your Credit Report?, 2019). 

If you are a few days late, the credit bureau won’t know, but you might have to pay late fees. If possible, always pay by the due date. If that isn’t possible, pay before the 30 days are up, so the late payment doesn’t end up on your credit report.

4. Report Rental Payments 

Making payments on time is a good way to improve your credit score. That includes rental payments. Unfortunately, landlords usually don’t report rental payments to the credit bureaus unless the tenant stops making them. That means your rental payments can likely hurt your credit score but not help it.

You can change that with VerticalRent’s Credit Booster service. This service will submit your rental payments to Experian. Then you will get a credit boost every time you make an on-time payment. It only takes two minutes to sign up for the service, and it can help you improve your credit score quickly.

5. Get and Use a Credit Card

When it comes to improving your credit score, you probably didn’t expect to read that you need to use a credit card. However, using a card the right way can improve your score (Vasel, 2018). If you don’t currently have a credit card, get one. Use the credit card to buy something small each month and then pay the balance in full. This will help your score move in the right direction. It will also help you learn how to be responsible with credit.  

If your credit is too bad to get approved for an unsecured credit card, get a secured credit card. You will pay a deposit to get the credit card. The deposit is essentially collateral. Your credit limit will probably be the same as your deposit. For example, if your deposit is $200, your credit limit will likely be $200 as well.

Even though the card is secured, it can help your credit. The credit card company will report your payments to the credit bureaus, so your score will go up as long as you make those payments on time.

6. Apply for Credit Slowly

When you apply for credit, lenders check your score. They make what is called a hard inquiry. Each hard inquiry can cause your credit score to decrease by as much as five points (NerdWallet, 2019). If you apply for a bunch of credit cards at one time, your credit score can spiral downward.

What happens if you’re shopping for the best rate, though? You don’t want to overpay for a rate, but you also don’t want your score to tank. You can avoid this problem by conducting “rate shopping.” Credit bureaus give you a set timeframe to shop for and compare rates.

For example, if you want the best rate on an auto loan, you’ll likely pull rates from different lenders. Each lender will make a hard inquiry, but the credit reporting bureaus will realize you aren’t trying to get several auto loans. Instead, you are looking for the best rate. Make the inquiries within 45 days, so your credit score only takes a single hit.

7. Build Your Credit While Living in a Rental

You can get a rental with bad credit by following these tips. Once you secure your rental, start rebuilding your credit. It takes time to build your credit back up, but it is worth the effort. After your credit score is where it needs to be, you can find the apartment or house of your dreams. Your credit won’t hold you back any longer, so you can fill out the paperwork and go through the credit check without any problems.

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