Your credit score matters when renting an apartment. Looking at your credit profile gives potential landlords and lenders an idea of how reliable you are at borrowing money and paying it back. But if you're new to credit or your score is low, there are still ways to get an apartment by providing proof of financial stability.
Do You Need Good Credit to Get an Apartment?
The short answer is, it depends on where you want to live and the landlord.
The average credit score of renters across the country was 638 in 2020, according to a study by RentCafe, an apartment search website. For high-end apartments, the average score was 669, while on the lower end, the average score was 597, the study found. (Note: this study used the VantageScore).
Good credit makes it easier to rent an apartment, but a low score is not always a dealbreaker. Credit scores run on a scale of 300 to 850. The definition of good credit varies by type of score and lender. Here's how credit scoring company FICO defines the credit score bands:
- Exceptional credit score: 800 and above
- Very good credit score: 740 to 799
- Good credit score: 670 to 739
- Fair credit score: 580 to 669
- Poor credit score: Below 580
If you live in a competitive rental market, you may need to have a good credit score and solid credit history even to be considered for the apartment. Some landlords are upfront about a credit score cutoff for potential renters, but you can always ask before you apply.
If you live in a cooler rental market or you're renting from an individual landlord (instead of a rental company), you may be able to get an apartment with a lower score provided you can offer other information to prove your trustworthiness.
Ways to Improve Your Chances of Renting With Bad Credit
Here are four ways to apply for an apartment with bad credit. Try these options after you've had an initial conversation with the landlord about your credit situation. Being upfront about your credit history can help the landlord understand where you're coming from.
Provide a co-signer or guarantor
The best way to improve your odds of getting an apartment with bad credit is to ask someone else with good credit to be a co-signer or guarantor. A guarantor agrees to be on the hook for rent if you cannot pay, which also puts their credit on the line. A co-signer can be a roommate with good credit who signs the lease with you and is similarly responsible for rent if you aren't able to pay.
Since your inability to pay may hurt your co-signer or guarantor's credit and lead to personal issues, it's important to be confident about your financial situation before you go down this road.
Offer a higher security deposit
Offering landlords a higher security deposit or offering to pay for a few months' rent upfront can help assure them about your ability to afford the place. Consider this option carefully so it doesn't hurt your financial situation and document it so you can get the deposit amount back when you move out.
Demonstrate consistent income and employment
Your pay stubs and a letter of employment are essential ways to prove cash flow even if your credit isn't the best. If you have a lot of money in savings or a well-stocked emergency fund, you should also share that with a potential landlord. If you work multiple jobs, share the total income you earn from all of them. A common rule of thumb is that rent shouldn't cost more than 30% of your income, but that may not be practical in expensive rental markets.
Obtain letters of recommendation
Get letters of recommendation from your employers, past landlords, or professors to demonstrate evidence of good character. Landlords may or may not check references if you've proven other means of financial stability, but it helps to have them ready to go when you're applying for an apartment.
Alternative Options for Renting Without Credit
If you don't have experience using credit or are new to the world of credit, you still have some options for renting that don't involve a credit check.
Renting from private landlords or no-credit-check apartments
Property management companies and seasoned landlords typically require credit checks as a matter of course. You may still be able to find housing through an individual landlord or via no-credit-check apartment searches on the internet. Proceed with caution, because you could fall victim to a housing scam.
The Federal Trade Commission warns of red flags that indicate a rental listing might be a scam. They include if a landlord asks you to wire them money, requests a security deposit or first month's rent without giving you a chance to see the place, or asks you to send money while they're traveling abroad.
Your chances of getting a place without a credit check are better if you sublet an apartment from someone for a short time. You may still need to prove to the existing tenant that you are capable of paying your rent while you sublet the place. Before you sign anything, check if they are allowed to sublet the apartment because some lease agreements prevent sublets or require the landlord's prior approval.
Building and Improving Your Credit for Future Rentals
Use rent and utility reporting services, such as Boom
Traditionally, rent and utility payments, including your cell phone plan, are not part of your credit reports. Conversely, falling behind on those payments can be reported to the bureaus, which can hurt your score. We might be a little biased, but we think getting rewarded for your positive rent and utility payments is a no-brainer. That's why Boom gives you an easy way to build credit, ensuring your on-time rent payments – past and ongoing – are added to your credit reports.
Make on-time payments for all bills
The single most important way to build and maintain a good credit score is to pay all your bills on time. Your payment history accounts for 35% of your FICO score and 40% of your VantageScore, and this credit score factor includes whether or not you paid your obligations on time. Late payments can cause your score to plummet quickly. Pay at least the minimum on credit cards and loans and ideally, pay them in full to avoid carrying a balance. The same goes for your rent. Paying it in full by the due date avoids hurting your score.
Start with a secured credit card
Secured credit cards are geared toward people who want to build credit. You pay a security deposit upfront that is typically equal to the credit limit of the card, and then use it like a normal credit card. Your payments are reported to the credit bureaus, which helps build your score and a solid credit history. Eventually, your score should improve to the point that you can move on to a regular credit card that doesn't require a deposit.
Become an authorized user on someone else's credit card
Similar to getting a guarantor for your apartment, becoming an authorized user on someone else's credit card allows you to piggyback off of their good credit record to build your own. You don't have to use their card at all in order to benefit from their good credit. They're still on the hook to pay the bill at the end of every cycle.
Monitor your credit reports and scores
Keeping tabs on your credit score and credit reports is key to staying on top of your credit by checking for any discrepancies or factors affecting them. You have multiple credit scores, but the most commonly used ones by lenders are those generated by FICO and VantageScore. You have three credit reports, one each from the major credit bureaus Equifax, Experian, and TransUnion. Many banks and financial apps offer free access to your credit scores and reports. You are also entitled by law to obtain a free copy of each credit report once a year using AnnualCreditReport.com.
The bottom line
While renting an apartment can be challenging if you don't have good credit, you still have options. Improving your credit over time and factoring your past rental payments into your score can make your next apartment search easier.