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Special section Beat the bad credit blues

Bad credit history can make it tough for you to find a place to live.

Don't let bad credit ... impact your rent

Your credit history and your rent
 

Why it matters
Bad credit won't necessarily leave you homeless, but it can make renting an apartment difficult and limit your choices.

Most landlords want to know whether you will miss rental payments or trash their property. They typically avoid applicants with a significant amount of debt, previous evictions, damaged rentals or a record of skipping out of their leases.

A credit-impaired consumer's rental application can be denied. The consumer may be asked to provide a co-signer or be asked for a deposit when one usually is not required. The landlord may demand a larger deposit than normal or require a higher rent.

If one of these actions is taken, the landlord must notify the applicant and tell him or her what credit bureau the landlord used so the applicant can contact the agency and get a free credit report within 60 days.

Part of an apartment manager's screening process to evaluate rental applicants might include checking a tenant screening service or retrieving a credit report from the three major credit bureaus: Equifax, Experian and TransUnion.

The credit reports can contain information from your rental history, such as previous landlords, and public records, such as court or eviction files.

Some apartment managers set cutoffs for FICO scores, but the FICO credit score tends not to be as useful from a landlord's perspective, says Jake Harrington, co-founder and vice president of business development at On-site.com, a residential screening company. He says the credit scoring model considers things that are not important to landlords and ignores the things that are important.

Some apartment managers may rely on residential screening companies, such as On-site, that provide their own scores. On-site, like many screening services, reformats the credit report and scores it according to a model that weighs income and debt, credit history and rental history. Harrington says problems, such as medical debt and student loans, aren't calculated into the score when it's the apartment company's policy to ignore them.

What you can do
You correct a poor credit record by proving that you are a good renter. Show that you've paid on time and in full, and be prepared to pay a higher security deposit. Have someone ready to co-sign the lease if needed, says Doug Culkin, president of the National Apartment Association.

Several months before you begin the apartment search, review and fix errors in your credit report. Get your annual credit reports from the three major credit bureaus. Also, get your FICO score so you know where you stand.

Consumers newly discharged from bankruptcy particularly need to check their free credit reports to make certain accounts with debts that were discharged show a zero balance.

Gather whatever financial information you can to show that you are good renter. Get a letter from a previous landlord describing your positive payment history and photocopies of rent checks. If your credit report is improving, get a copy of that to show.

Find out more about tenant screening.

-- Posted: Oct. 10, 2007
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