How to Rent an Apartment with Bad Credit

Renting an apartment with bad credit can be challenging, but it isn’t impossible. Be honest with potential landlords about your credit history, come prepared with proof of income and references, and be willing to pay a higher security deposit or a few months’ rent in advance. In this article, we explore a variety of ways you can rent an apartment with bad credit. 

In this article:

• What Is a Good Credit Score?
• What Does FICO Stand For?
• What Do Landlords Look for in a Credit Report?
• What If Your Credit Score Is Incorrect?
• Does a Poor Credit Score Disqualify a Renter from Getting an Apartment?
• So How Can I Rent an Apartment with Bad Credit?

Everyone hits a rough patch now and again. Whether it was an unforeseen, sudden event or a steady decline into credit mayhem, you now have bad credit. While you may think it’s impossible to rent an apartment with bad credit, have no fear! It may be more difficult, but it can be done.

The first thing you need to know is: how bad is it, really? You can monitor your credit by getting a free credit report at annualcreditreport.com. This is a government-mandated website and is completely free. (Beware of websites that want you to pay for your report. They will claim it is free but then ask for credit card information.)

What is a good credit score?

A good credit score is anything above 700. But let's break that down. Yours might not be as bad as you think! Credit scores range from 300 to 850. Here's the breakdown:

• Anything below 579 is “very poor”
• Between 580-669 is “fair”
• 740-799 is “very good”
• Anything over 800 is “excellent”

There are three major credit bureaus you need to be aware of: TransUnion, Equifax, and Experian. You won’t have the same score across all three – each has their own way to determine your FICO score.

What does FICO stand for?

FICO is a company that specializes in “predictive analytics.” (Which is just a fancy term for judging what you might do in the future by what you’ve done in the past.) The name “FICO” is derived from the company’s original name, Fair Isaac Company, which was founded in 1956 by Bill Fair and Earl Isaac. Most major lenders in the country use FICO to determine credit. Your score is determined by a top-secret method that basically includes the following:

• Your payment history
• The length of that history
• How much you use credit
• The mix of your credit (this predicts how well you handle different types of loans, such as a car loan, credit cards, mortgage, etc.)

Each of the above sections is given a weight, with your payment history as the most important factor – 35 percent of your total score.

Another 30 percent of your credit score is determined by your credit utilization. Do you routinely max out your credit cards? If so, then you utilize too much credit. This indicates that you don’t handle debt responsibly. The best way to improve this section of your score is to keep low (or zero) balances on your credit cards. Don’t close these accounts – just pay them down. Credit cards are very important in showing your ability to handle debt (more so than a car loan because credit cards are revolving balances). On the flip side, credit cards also do the most damage. Keep your balances below six percent.

So why don’t you close them? You have something called a “utilization ratio” that figures into your FICO score. Keeping that line of credit open with a zero balance increases your utilization ratio. The minute you close the account, you no longer have that line of credit to factor into your overall score. Your credit can also suffer if the bank or lender closes your card because you don’t use it.

What do landlords look for in a credit report?

Landlords aren’t only looking at your credit score in your credit report. Different factors like payment history, debts, bankruptcy, and evictions are taken into consideration as well. Your credit report will also indicate personal information, including your employment history.

Payment history

Your payment history is a big factor in getting approved for a rental. Landlords want to see that your payments are consistently made on time and in full. Whether it’s a car payment, utility bill, or monthly rent, frequent late payments will raise a huge red flag to a potential landlord. 

Rental history

Rental history is the biggest indicator to a landlord of how you will be as their tenant. Rental history will reveal any money owed to a previous landlord, any payment reports sent to a credit bureau, and information on where you previously rented, allowing your potential landlord the ability to contact your previous landlord. 

Debts

Landlords will also pay attention to any debts or delinquencies. If you’ve been sent to a collection agency for a past eviction, have a repossessed car, or have excessive credit card debt, your rental application will give the landlord reason to pause. Debts like student loans are typically looked at, but they don’t usually disqualify you from being approved for an apartment. 

Bankruptcy Status

After you file for bankruptcy, it will stay on your credit report for about 10 years. A bankruptcy record will show all the accounts and companies involved in your bankruptcy, giving your landlord a clear picture of the case. Your landlord will specifically be looking at a pending or a discharged bankruptcy. A pending bankruptcy could make a prospective landlord pause because it means that the tenant could be free from financial obligations if it goes through. A discharged bankruptcy may look better to a landlord since it means the case has concluded.  

What if your credit score is incorrect?

Apartment communities typically look for credit scores 600 or above. If yours is lower, the first thing to do is look over your credit report for any mistakes. It’s important to correct mistakes quickly since items can stay on your credit report for up to seven years (except in the case of a bankruptcy, which stays on your report for 10 years). Get these mistakes taken care of and it might improve your score.

To fix a mistake, put it in writing. Explain why the information is inaccurate and send it directly to the credit reporting company. The company will investigate your complaint and respond back in writing within 30 days. If the correction alters your credit report, they will provide you with an updated copy of that, as well.

After contacting the credit reporting company, write to the lending company that made the error and explain why you are disputing the item. Include any documents (such as receipts) you may have to support your claim. If they made a mistake, they must contact the credit reporting companies and have your information corrected.

Does a poor credit score disqualify a renter from getting an apartment?

A poor credit score doesn’t mean you can’t rent, but it does mean you’ll have to make concessions. It may seem unfair that you have to jump through hoops to be able to rent if you have a low credit score but try to think like a landlord. Your landlord is essentially taking a chance on all their tenants. If you default on rent, the landlord’s income will take a major hit. The tenant and landlord relationship is a symbiotic one. If you’re willing to meet your new landlord halfway, you could be well on your way to your new rental.

So how can I rent an apartment with bad credit?

Be honest about your credit

Okay, now that you know what your credit score is and exactly what is on your report, you are armed with knowledge and ready to get that apartment! Dress up a little (not overboard in your favorite suit – or tux – but not your ripped jeans, either) and treat the apartment application process like a job interview. This will improve your odds, even with a less-than-stellar credit score.

Be ready to explain your credit issues and how you are handling them. If you are making strides toward improving your credit score, this might increase your chances of being accepted. Bring along proof of income (like a pay stub) or have your employer write a letter verifying your employment status and income. Information about your current checking and savings balances might help, as well.

Make sure you can afford the apartment

Make sure you can afford the apartment. The rent shouldn’t be more than 25-35 percent of your monthly income. If you’re trying to rent an apartment out of your price range, the apartment manager may think you have a habit of overextending yourself. Think of your rent as an excellent opportunity to improve your credit score by consistently paying your rent on time. If the apartment is even slightly over budget, it may be more difficult to make those payments and reach that goal.

Provide proof of regular income and employment

Provide an accurate picture of how much your monthly income is along with your employment history. There are many ways to provide proof of income but showing proof of a reliable and steady income that is more than 30 percent of your monthly rent will prove to your landlord that you will be a trustworthy tenant. 

Pay a higher deposit

To use a (in this case, rather irresponsible) gambling term, consider upping the ante. You can offer to pay a higher security deposit, for example. If you can pay a month’s rent (or two) in advance, this might give the apartment manager a sense of security, knowing they will have a reserve in place to cover costs in the unlikely event that you don’t make a rent payment.

Pay by direct deposit

Offer to pay rent through automatic transfer. If you have the rent automatically deducted from your checking account every month, this can help you get approved even with poor credit.

Get a cosigner

If you can’t afford to pay in advance, pay a higher security deposit, or pay rent through automatic transfer, consider getting a cosigner. Just as with a car loan, this person would be held responsible if you default on your rent.

Find a roommate

But what if you can’t get someone to cosign or you don’t want to ask someone to do this for you? Then your next option is to find a roommate with good credit. If your roommate has a good credit score, the apartment manager may be willing to overlook yours. Or, if the roommate is agreeable and the apartment community will allow it, just have the roommate sign the lease.

Get references

Will a former landlord vouch for you? A poor credit score doesn’t necessarily mean you don’t pay your rent on time. If this is the case, a letter from your former landlord may be all you need to convince your new property manager to overlook a lackluster credit report.

Provide proof of rental history

A glowing record as a past tenant will ease the mind of a landlord even if you have a less-than-stellar credit score. Having a history of making rent and utility payments on time and in full shows that you are capable of being a great resident. If they don’t already, ask your landlord to pull your rental history when they run your credit check. 

Find a no credit check apartment

Finally, skip the credit check altogether. Instead of looking at large apartment complexes often owned by property management companies, consider looking at smaller, independently owned apartment buildings, duplexes, or houses. While property management companies usually insist on a credit check, independent landlords may not – or they may be more willing to overlook it if they feel good about you. If you can plead your case directly to the property owner, you may be able to overcome the bad-credit hurdle and get the rental of your dreams.