How to Pass a Rental Credit Check—Even With Bad Credit
April 12, 2024 by Marty Orefice | Credit, Financing
In the highly competitive rental market, having a less-than-perfect credit score can make it difficult to find a suitable home. With the demand for housing increasing and inventory low, landlords have the luxury of being very selective. Rental credit checks are an essential factor in most applications, and they can either make or break your chances of securing a rental property.
According to Fannie Mae, first-time homebuyers had an average credit score of 746, which is in line with the average credit score across all homebuyers, not just first-timers, which is 754. Most conventional mortgages require first-time homebuyers to have a minimum credit score 620 for approval.
A poor credit history can be a critical factor in rescinding an application for the perfect house or apartment.
If bad credit has previously caused you rejections, don't worry. With the right strategies, you can still get approved for quality rental housing. This comprehensive guide will teach you what landlords are looking for, how to offset negative marks on your credit report, and creative ways to showcase your reliability as a renter.
What Is a Rental Credit Check?
A rental credit check is a tool used by landlords to evaluate the creditworthiness and financial responsibility of a potential tenant. As part of the application process, most landlords will request a credit check before approving a new tenant. This allows them to review your credit history and payment records to determine if you will likely make your monthly rent payments in full and on time.
When you authorize a rental credit check, landlords gain access to detailed credit reports from major credit bureaus such as Experian, Equifax, and TransUnion. These reports include a wealth of information beyond just your three-digit credit score, such as:
- Your full payment history across credit cards, loans, utilities, and other bills
- Outstanding debt balances and your credit utilization ratios
- Public records like bankruptcies, foreclosures, or prior evictions
- Collections accounts and delinquencies
- Your overall credit age and a list of all accounts
Landlords use these insights to verify the information on your rental application while also seeking green flags like on-time payment histories and low debt usage. At the same time, they watch for concerning red flags like:
- Frequent late or missed payments
- Accounts in collections
- Maxed-out credit cards or other high balances
- Previous evictions, foreclosures, or bankruptcies
- Short credit age with little payment history
While reviewing your full credit report gives landlords a comprehensive view of your finances, your credit score itself is a quick indicator of your creditworthiness. Most landlords have a minimum credit score requirement, ranging from 600-700 depending on the rental market and property.
A survey of 5 million renters found that the average credit score was 638.
Here are the minimum credit scores needed for different types of units:
- Low-end: 597
- Mid-level: 626
- High-end: 669
It's important to note that rental credit checks fall under the category of a “soft inquiry” or “soft pull” on your credit. This means the credit check won't impact your credit scores like a “hard inquiry” from applications for new loans or credit cards. Your scores remain untouched during this process.
Minimum Credit Score Requirements for Rentals
While rental credit check requirements can vary based on the landlord, property, and local rental market, most landlords have a minimum credit score threshold in mind when evaluating applicants. Understanding these general score requirements can help set appropriate expectations.
No universal minimum credit score is used across the board by all landlords. However, when reviewing rental applications, most property managers look for a score of around 600 or higher on an applicant's credit report. A score in this range is considered “prime” or “good” credit according to the standard model:
- 800-850: Excellent credit
- 740-799: Very good credit
- 670-739: Good credit
- 580-669: Fair credit
- 500-579: Poor credit
- 300-499: Very poor credit
While 600 is a common baseline, landlords in more affluent areas or those renting higher-end apartments may require potential tenants to meet a minimum of even higher credit score, often in the 650-700 range. These higher minimums can help landlords be more selective and approving only those with excellent credit histories.
On the other hand, some individual landlords may be open to considering applicants with credit scores below 600 if they have other positive factors, such as an above-average income, sizable savings, strong references, or a willingness to provide more upfront money as security.
So, while a sub-600 credit score isn't ideal, it doesn't necessarily mean you are automatically disqualified from renting. By taking the proper steps to offset risk and showcase your reliability, getting approved for a rental with a “fair” or even “poor” credit score is still possible. The tips in the following sections will help maximize your chances.
Top Tips for Passing a Rental Credit Check With Bad Credit
While a poor credit score can definitely complicate your rental search, it doesn't have to be a permanent roadblock. There are proactive steps you can take to improve your chances of passing a landlord's credit check and getting approved for quality rental housing, even with subprime credit.
1. Improve Your Credit Report
One of the best ways to overcome bad credit when facing a rental credit check is to improve your credit profile as much as possible beforehand. Pay close attention to your credit reports and:
- Request copies from all three bureaus to check for any errors or derogatory items that should be disputed and removed.
- Look for any outstanding payments, collections, or delinquencies and pay them off or at least get them current.
- Highlight efforts like debt consolidation programs or payment plans to demonstrate that you are actively working to improve your credit.
Even if you can't get into the “good” credit range immediately, showing an upward trend and recent improvements can help make up for past blemishes when it comes to convincing a landlord.
2. Offer More Money Upfront
For landlords, poor credit represents financial risk as it could indicate potential missed rent payments down the road. One way to help offset this risk is by offering to provide more money upfront in the form of:
- A higher security deposit: Instead of a typical one-month deposit, you can offer to put down a double or even triple deposit amount as an added incentive.
- Pay rent in advance: Offering to pre-pay 2-3 month's rent when you first move in provides more financial security for the landlord.
Having this extra capital invested upfront demonstrates that you are committed and have the means to meet your rent obligations for the foreseeable future. With more money backing you initially, landlords may be more inclined to work with you.
3. Get a Co-Signer
If your credit is very poor, one of the most reliable ways to get a landlord's approval is by having someone with good credit co-sign your rental application and lease agreement. A co-signer is essentially vouching for your financial responsibility, allowing landlords to factor in their credit report and score as additional security.
Ideal co-signer candidates are relatives, trusted friends, or others with strong, established credit. Be forewarned that co-signing is a big commitment – your co-signer will be equally on the hook for all rent payments and damages should you default. As such, it's crucial to only ask someone you have an honest, transparent relationship with and keep that line of communication open.
4. Provide Supplementary Documentation
In addition to credit reports, many landlords will request supplementary documents like:
- Recent pay stubs or income statements showing steady employment
- Tax returns or bank statements as proof of savings/assets
- References from any previous landlords you may have
While your financial track records are important, these documents paint a more complete picture of your overall reliability. You can also provide written explanations for any negative items on your credit report, whether it was due to circumstances like medical issues, job loss, or other understandable situations.
Offering this additional paperwork upfront gives landlords a more holistic view of your situation and financial habits beyond just a credit score.
5. Look for Flexible Landlords
Suppose you have severely damaged credit from events like foreclosures or multiple derogatory items. In that case, you may have difficulty getting approved at large apartment communities or properties owned by big real estate companies. Larger operations often have strict, unbendable credit policies.
In cases of poor credit, your best bet may be to look for more flexible individual landlords who own just a handful of rental properties. With fewer units, they may be more open to considering your full financial profile and specific situation instead of just credit scores.
Some may also be more open to short-term rental agreements like 6-month or month-to-month leases with the option to extend if you prove yourself a reliable tenant. This allows you to build up more positive payment references before potentially transitioning to a longer-term agreement.
Building Healthy Credit Habits for the Long-Term
While the previous tips can help boost your chances of passing a rental credit check in the short term, it's also important to look at improving your credit profile as a long-term financial goal. A strong credit score doesn't just make finding rental housing easier—it opens up many other opportunities and cost savings.
There's no quick fix for bad credit. Rebuilding your score takes time and commitment to developing healthy financial habits. However, the payoff is worth the effort, as good credit can:
- Help you qualify for lower interest rates on future loans and mortgages
- Increase approval odds for credit cards and other financing
- Make it easier to get approved for rental housing or home purchases
- Potentially lower insurance premiums and security deposits
- Give you more negotiating power as a consumer
So, what are the essential habits for building and maintaining good credit over time? Follow these best practices:
- Make all monthly payments on time, every time – payment history is the biggest credit score factor
- Keep credit card balances low compared to their limits – under 30% utilization is ideal
- Only apply for new credit accounts when absolutely needed to minimize hard inquiries
- Check credit reports regularly and dispute any errors immediately
- Maintain a mix of different credit types like revolving loans and installment loans
Improving your credit score is an achievable goal through committed financial discipline, even if you are starting from a poor credit situation.
Passing future rental credit checks will be a non-issue if you dedicate yourself to developing healthy credit practices. You'll have the financial freedom and peace of mind to make the housing choices that are truly best for you and your family's needs. The path to getting credit back on track begins today.
You Can Find Housing Despite Credit Challenges
While poor credit can feel like an impossible barrier when searching for a quality rental home, the truth is that options are available if you take a proactive approach and demonstrate your reliability as a tenant. By understanding exactly what landlords are looking for in rental credit checks, you can take targeted steps to improve your chances of approval.
Start by regularly checking your credit reports to identify any potential issues or errors that need to be addressed. From there, consider ways to offset your low credit score, like offering a bigger upfront deposit, getting a co-signer, or providing supplementary documentation proving your positive financial habits.
For some with damaged credit, looking for more flexible individual landlords may be the best path forward.
No matter where you start, a long-term commitment to rebuilding your credit profile through consistent on-time payments and responsible borrowing habits can steadily improve your chances. As your credit strengthens, more rental options, lower borrowing costs, and increased financial freedom become accessible.
