How to Rent an Apartment with Bad Credit History

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Looking for an apartment is stressful, especially if place after place is turning you down due to a bad credit history. So, what can you do to rent an apartment when you have bad credit history? Most landlords, according to http://www.creditcards.com/credit-card-news/rent-apartment-bad-credit-score-1265.php , are looking for a credit score of roughly 670.  Having a credit score below 670 can be a problem even if you have a good salary and a clean rental history, that means you have no history of not making rent payments or even late payments. It should be noted that 670 is only an average credit score that landlords are demanding. Some landlords will ask for a higher credit score and some a lower one.

There are 5 things that can impact your credit score: payment history, debt, how long you have been building credit, any new credit, and types of credit. “Payment history” accounts for 35% of your credit score. The category covers making your payments on time, tracking any late payments you have made, and if you have filed for bankruptcy. The “Debt” category counts for 30% of your credit score. It measures how much money you owe to others and compares it with how much credit you have available to you.

The next category is “How Long you have been Building Credit”. This accounts for 15% of your credit score. The longer you have been building credit the higher your credit score will be. The “New Credit” part of your credit score counts for 10% of your total score. This takes into account not only the new lines of credit you have opened but also any applications for new credit you have submitted and over how long this has taken place. The “Types of Credit” category is 10% of your credit score and covers the variety of credit you own (credit card, car loan, mortgage, etc). Your bad credit is made up of missed payments and outstanding debts. Both missed payment and outstanding debts stay on your credit report for up to seven years, even after you pay off your debts.

For more information visit: http://finance.yahoo.com/blogs/daily-ticker/credit-score-calculated-130013194.html

A bad credit score limits your choices when it comes to renting a place to live. This is because renting is similar to extending a line of credit to a tenant. The landlord is letting you live on their property and trusting you will pay each month. A bad credit report is tangible proof to landlords that you have problems paying the bills you already have. Landlords, especially those in high demand areas, are likely to overlook the person with bad credit for another who appears more reliable on paper. The landlord who decides to rent to a person with bad credit runs the risk of incurring financial loss.

 

Softening and Rebuilding your Credit

There are things you can do to soften a bad credit report for potential landlords. First thing is to pay off any creditors and ask them to provide letters stating you have paid your account with them in full. When you begin doing this, start with past landlords and utility bills first. Having unpaid accounts with a previous landlord or utility company are huge red flags to any potential landlord and likely to get your application rejected. Other red flags on your credit report are: having previously declared bankruptcy, making late payments, having your wages garnished, and having a judgment filing (court ordered repayment).

Another thing you can do to soften your credit report is to write a letter explaining your bad credit and what you have done to begin rectifying the matter. Things that could legitimately explain bad credit are: divorce, job loss, and medical bills. A hundred word statement can be added to the bottom of your credit report explaining the circumstances surrounding your bad credit.

Besides softening your credit report you can also take steps to begin rebuilding your credit score. The first step in rebuilding your credit score is to look over your credit report and ensure all the information is correct and up to date. The Fair Credit Reporting Act means that you can receive your credit report for free every 12 months. To take advantage of this visit: https://int.annualcreditreport.com or call 1-877-322-8228. If you want to challenge any of the information on your credit report that is wrong, you can dispute it by contacting one of the three credit bureaus (Equifax, Experian, and TransUnion).

Once you have ensured all the information on your credit report is correct you can start rebuilding your credit report by using your credit card. When you use a credit card (rather than a debit card) and consistently pay off the bill you are building your credit. For this, it is better to use a bank credit card then a retail credit card. It is important that you make all minimum monthly payments on all your bills when rebuilding your credit, no matter how small. Missing a small payment will have just as big of an impact on your credit score as missing a big payment. Another way to build your credit is to take out a small loan from a bank and pay it back. A bad thing to do, when trying to rebuild your credit score, is to close accounts. Closing accounts will actually hurt your credit score. Healing your credit score is not like waving a magic wand. It takes work and time but is worth it.

For more information visit: http://www.bbb.org/credit-management/balancing-act/improve-your-credit-score/index.html

Or visit: http://www.creditscore.net/establishing-good-credit/

 

What are you’re options

Before you ever start looking at ads set a realistic price range for yourself. Stick to that price range because you are not going to do you or anyone else any favors if you rent a place you cannot afford.

The easiest way to rent an apartment when you have bad credit is to avoid having a credit check run. A landlord needs you permission to run a credit check on you but you should look for landlords who will not run a credit check at all. When looking for landlords who won’t run a credit check the first places to avoid are large property management companies.  For these companies it is almost mandatory for a credit check to be run.  Small companies or privately owned complexes may be your best options. Other options include landlords with multiple properties, rental places that have been empty for a while, and places that do not have a city block long line up outside their rental office. It will likely take you a while to find a place so start your search early.

If you want to know if a particular landlord requires a credit check call the rental office, anonymously, to ask questions. Ask about both the criteria for approving tenants and specifically about any required credit scores. People have two different lines of thinking  when it comes to whether or not you should reveal your bad credit. One line of thinking is to be up front about your credit history and then show potential landlords what you are doing to heal your credit score and that you are a reliable tenant. The other line of thinking is that you should not talk about your credit history at all. Instead, talk about what their standards and policies are for tenant acceptance.

 

Where to Look

Once you know what type of places to look for you have to find them. These places may not be all that easy to find. You have a few options of where you can search for an apartment. You can search online at places like www.rent.com where you enter your search criteria and all relevant results come back. You can also search Craigslist (http://www.craigslist.org/about/sites/) or similar sites. You will have to search through the ads on Craigslist a bit because you will find ads for everything, from large companies to private landlords. Besides the internet you can also search paper ads for apartments. Both the newspaper and community boards are good places to find apartment ads. A community board is a place in the community where anyone can post fliers or ads. In the newspaper the Sunday classifieds have the most rental ads. Other than the internet and paper you can also search for places to live through people. Real Estate Agents are great resources to find places to live. These agents have access to every place in their surrounding area that is for sale or for rent. Lastly, talk with your friends, family, and colleagues to see if they know of any places for rent. You may have a better chance of getting an apartment if you are referred by someone the landlord knows.

 

Low Income Housing

Whether or not you like the idea of applying for Low income Housing it is an option.  In all the research I did not once was a credit check mention or even credit limit. For some, applying for Low Income Housing can be a hard pill to swallow, it rattles a person’s pride. However, there is nothing wrong with applying for Low Income Housing. If you apply for low income housing be honest about your circumstances. The more honest you are the better chance you have of being accepted.

If you choose to apply for Low Income housing then, after filling out the application, you are going to have to take the following steps. First of all you need to find an available housing unit. This unit must be approved by the government. You can find can find apartments and houses that are approved for low income housing here: http://www.lowincomehousing.us/. You can also find low income housing by visiting the local Public Housing offices Once you have found a place, you will need to have a criminal background check done. In order to be qualified for Low Income Housing you need to have a clean criminal check. After you pass the criminal check your income will be confirmed. Your employer will be contacted to receive copies of your recent pay stubs. The thing about low-income Housing is there has to be an income limit in order for the program to work. This is what the government/landlord is looking for when they contact your employer. They are ensuring your income falls below the income limit. As well, your monthly income will determine how much you pay in rent each month. The third piece of information to be verified is your bank accounts. You cannot have a stockpile of money stashed away and still be eligible for Low Income Housing. Lastly, the number of dependents you claim on your application will be verified as well. Once you go through these steps you can sign the lease and move in to your new place.

 

Habitat for Humanity

Some people think of Habitat for Humanity when they are having trouble finding housing they can afford. If you choose to go to Habitat for Humanity there are a few requirements you will have to meet. First off you have to have a  minimum credit score of 550. Other requirements include income limits (both minimum and maximum), bankruptcy rules, you need to agree to work a certain number of hours building houses, and your previous housing must meet certain conditions (overcrowded, unsafe, uncomfortable, or unaffordable). Visit: http://www.habitatdetroit.org/home_ownership/ownership_overview/qualifications_requirements/  to view the Detroit Habitat for Humanity requirements. It may be that not all cities have the same requirements. Visit your local Habitat for Humanity for full information on how to apply for and receive a house.

 

For more information about Habitat for Humanity visit: http://www.habitat.org

 

Getting a Lease

Once you have found a place you like there are some things you can do to help offset your bad credit. First thing you can do is ask someone to give you a recommendation stating that you would make a good tenant.  The best people to ask  are those you have had a financial relationship with in the past, such as bankers, past landlords, and employers. Previous landlords tend to be best because they can attest to the fact that you have consistently paid rent in the past and you are a good tenant. A recommendation from a person you have had a financial relationship with in the past can show a landlord you are not a financial risk. Another person who can be good to ask for a recommendation is a friend who knows the landlord.

Another thing you can do is ask a friend or relative co-sign for you apartment. You need to be selective with who you choose. It should be someone you trust and have a good relationship with. Remember, whoever you ask, if you do not pay your rent on time it is on your co-signer to pay it for you. Besides asking someone to co-sign the lease you can also find a roommate. Maybe one of your friends is looking for a place to live as well.  If you decide to get a roommate he/she should be someone with a better credit rating than you. The purpose of a roommate, in this case, is to have someone with a good credit rating who can be the primary lease holder. Some landlords only preform one credit check on the primary lease holder while any roommates are simply listed on the lease. This gives you a chance at having a good apartment while you build your credit back up. You are going to have to still pay your half of the rent to your friend.

Three other things you can do that might help are to: offer to pay more than just first and last month up front, make pre-authorized payments one of the terms of your lease, or do a trial lease.  By offering to pay more rent up front than just first and last month’s, you are showing responsibility.  This shows how serious you are in wanting the apartment and gives your landlord a financial cushion if you do not pay your rent. Some States place limits on how much you can pay up front for an apartment. Making pre-authorized payments a term in your lease will show your willingness and ability to pay rent on time.  Doing this means that every month either your landlord will be able to take your rent directly out of your bank account or a portion of each of your paychecks will go directly from you employer to your landlord.

The last thing you can try is to do a trial lease. This means that you are agreeing to a 3 to 6 month lease. There is the possibility of converting to a full year lease at the end of the 6 months if you have proven to be a good tenant. You may have to pay a higher rent during a trial lease than if you had a normal lease. However, once you convert over to a normal lease your rent should revert to the normal rates. In order to prove to your landlord that you are a good tenant you need to pay your rent on time, follow all the rules of the building, and keep your living area clean.

 

Conclusion

Even if you try everything suggested in this article you may not be able to find an apartment. Not all landlords want to take the risk a tenant with bad credit presents. If you do find an apartment or house to rent you need to live up to your end of the lease. Be a model tenant and do not give your landlord any reason to evict you. You may have to search for an apartment for a while and put up with a less than stellar apartment or living with family or friends in the meantime. While you search continue to build up and heal your credit. The better your credit the better your chances of finding a place to live.