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Credit Repair and Renting a New Apartment

by: Emma Higgins

Update: 09/2021

Credit Repair and Renting a New Apartment

Owning a home is getting more expensive all the time. Additionally, people are having a harder time getting a job that produces higher real wages. Therefore, the rental market is booming. However, one barrier to getting the apartment you’ve had your eye on could be your credit score.

A credit score is a numerical representation of how likely you are to pay your bills, and therefore how much of a risk a lender is taking when they loan you money. However, credit scores are used for more than loan and credit applications. Employers have begun checking applicant’s credit scores to see how well they manage money, and renters are using credit scores to decide which individuals to rent to, how much to charge them, and how large their deposit needs to be. Therefore, understanding how credit scores relate to your ability to rent a new apartment is a vital part of modern society.

How Landlords Use Your Credit History

A landlord’s biggest concern is that they lease their property to people who will pay their bill on time. As a result, it’s easy to see why credit scores are an increasingly important metric for landlords. There are several things a landlord looks for when they check your credit report.

The first thing a landlord looks for is how well you keep up with your bills. A series or late or missed payments on your credit report may give landlords pause when deciding whether or not to rent to you. This is a vital element in the modern rental market, as space is increasingly at a premium and any individual property usually has several applicants. Therefore, an applicant with a better history of paying their bills is more likely to be accepted than one that has late or missed payments on their report.

Landlords also use credit reports to check your debt to income ratio. This ratio tells them how much rent you can afford, as it measures how much money you owe against how much money you make. Therefore, it tells the landlord how likely it is that you’ll have problems when the rent is due because of your other obligations.

Finally, landlords use credit reports to look into public records. Public records include court judgements against you, and therefore can tell your landlord if you’ve been evicted in the past and why. These records can also give a landlord insight into the kind of person someone is. For example, if someone’s credit report has multiple judgements against them for assault or destruction of property, then the landlord may decide that there are better applicants for the apartment they’re trying to fill.

Does Renting Affect Your Credit Score?

Until recently, rental payment history was not incorporated into credit reports, while mortgage payments were. This disparity means that long-term renters have traditionally been denied the benefits of paying their rent on time that people with mortgages enjoy.

However, there are several new scoring models which take on-time rent payments into account when determining your credit score. If you’re on top of your game when it comes to paying rent on time, you might want to ask your landlord to participate in some of the free services, like PRBC, which reports your on-time rental payments to the credit monitoring agencies.

One problem with these models is that they are not widely used at this point. As a result, many renters are not reaping the advantages and benefits they deserve for paying their rent on time. Encouraging your landlord to use credit reporting services for rent payments is one way that renters can help themselves and others by making these models more popular.

Renters have much to gain from getting their rent payment history factored into their credit score. One study showed that adding positive rental data resulted in an average score increase of 29 points. This score increase can make a huge difference in what kinds of credit and loans you can qualify for, and dramatically alters the terms you’re offered on credit and other financial products.

Credit Score Requirements for Renting an Apartment

It’s important to remember that credit score requirements for renting an apartment change based on what kind of apartment you’re considering, the demand for apartments in that area, and the average credit score for an area.

Generally, a score between 661 and 780 is considered “prime.” A credit score greater than 780 is considered excellent, whereas a credit score of 660 or lower is considered sub-prime. One of the most commonly used credit score services for landlords is SmartMove, by TransUnion. This software attempts to predict the odds that a renter will default on their rent. The lowest acceptable credit score for this software is 560.

Can People with No Credit Find an Apartment?

When it comes to renting an apartment, having no credit is a better situation to be in than having bad credit. It is easier to establish a good credit history by taking advantage of introductory financial products, whereas repairing a damaged credit history can take time and expert help from credit repair agencies. Therefore, if you do not have a credit history but will be looking to rent an apartment soon, your best bet is to apply for a credit card and ensure you make your monthly payments.

Moreover, depending on where you are looking to rent, there may be landlords that specialize in helping tenants with no credit history. This is especially true in places like college towns that serve a high number of young renters. As a result, you shouldn’t allow a lack of credit history to discourage you from trying to rent a new apartment.

Credit Repair and Renting a New Apartment

If your credit history is less than perfect and you need to rent a new place, you might consider credit repair services. Credit repair companies such as Lexington Law can help remove negative and inaccurate information from your credit report to boost your score. Moreover, they can recommend financial products you can qualify for that will boost your credit score as long as you pay your bills on time.

Your credit score is increasingly important in many aspects of life. Don’t let fear of a bad credit report stop you from getting the apartment you deserve. Understanding how your credit score affects your ability to get a new place is the first step in getting the apartment of your dreams.

Emma Higgins

Emma has been helping people improve their credit scores for the past ten years and has written a number of credit repair companies reviews for us. Prior to that, she worked as a credit repair specialist and consultant for several of the best credit repair firms. She got into the credit repair industry after graduating with a degree in Finance before getting her MBA.