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.