How to Rent an Apartment When the Loan Is in the Toilet
There was a time when, in order to rent an apartment, you had to walk around for several minutes, decide that you need it, then sign a lease and pay a deposit. Those days came to an end when the concept of a credit score emerged in the late 1980s.
Originally designed to help financial institutions assess credit risk, credit scores have made their way into virtually every aspect of our lives . A bad credit score (usually considered to be below 600-650, although this number can be higher in competitive rental markets) will negatively affect your chances of getting not only a loan, but also a job and even a house.
This creates a dark feedback loop for those with bad credit: you can’t get a job or an apartment because you have bad credit, and you can’t improve your credit because you can’t get a job or an apartment. If you find yourself struggling to get a decent rent due to poor financial decisions made by Past You, don’t despair. It’s not easy, but there are still ways to get a decent apartment if your credit is not so hot.
Pay tax on the poor
The old adage that being poor is expensive applies in this situation, because one of the most effective ways to convince a landlord that you’re taking a good risk despite bad credit is to offer them more money in the form of higher collateral. . Some states limit landlords to a certain amount (usually 1–2 months’ rent), while some states allow more , and some, such as Colorado, have no limit at all. Whatever state you live in, you can alleviate your landlord’s concerns by putting more cash up front, and if you’re a responsible tenant, you’ll get that money back when you move out.
If that’s not enough, you can suggest a few other things:
- If possible, make an advance payment in addition to the deposit. An offer to the landlord of rent several months in advance will be very convincing.
- Offer to set up automatic payments. The landlord’s fears can be allayed if he knows that he will not have to beat a check out of you every month.
Co-borrowers, roommates and referrals
Another strategy requires the help of other people. If you know someone with a higher credit score who is willing to take on the responsibility, hiring a guarantor can help. Just like when you take out a loan, the rent guarantor legally agrees to pay the rent if you don’t. He offers the landlord a safety net in case you end up as poor as they can fear.
Be careful and prudent when trying to convince someone to become your guarantor – life will catch up with you quickly, and if you do not pay the rent due to circumstances beyond your control, they will have to pay the bills.
Another people-centric solution: roommates. If you know someone who needs an apartment and has better credit than you, it could be the main name on the lease. Keep in mind that they will be in the same situation as guarantors: if you pay them rent, they will have to pay your share.
Finally, if none of these options work, you can try offering your potential landlord a few suggestions. The best references will come from former landlords praising you and noting how consistently you pay your rent. If you can show a new landlord that you’ve never missed a monthly payment in your entire life—and that your former landlords love you enough to write a letter to that effect—they may want to ignore a disappointing credit score.
Show paper trail
The reason a landlord doesn’t want to rent you an apartment is because of your credit history. But many people have good incomes and even savings despite having bad credit—this account could be the result of identity theft, a few missed payments, or just some bad decisions you made a few years ago.
One way to overcome this is to show your landlord proof of your financial security: pay stubs from your job (a letter from your boss would be nice), bank statements, and paid utility bills. Basically, you’re trying to convince them that your credit score is only part of your financial history, so the longer the trail you show them, the better.
Target rent
In addition, you can look for apartments that do not require a credit check. This usually means looking for “rental by owner” apartments, which you usually find in private homes. These will be basement apartments, mother-in-law apartments or similar stand-alone units that are rented out by people looking for a little extra income. Platforms like Airbnb have reduced the number of these apartments on the market, but they still exist.
While some of these apartments can be surprisingly good, there are a few caveats to keep in mind:
- Legality. One of the reasons a landlord may refuse some documents may be the legal status of the apartment. If it’s an illegal apartment, it may not pass a security or health check, so you should do your due diligence before jumping into it.
- Fraud. Anything that seems to be a financial workaround these days is quite possibly a scam . Predators know that people with bad credit are desperate to find an apartment, so offering housing without a credit check is a great way to collect a security deposit and then call you. Don’t let yourself be pressured to hand over the money until you’ve actually checked everything.
If none of these strategies work for you, you can try one last gambit: talk to your potential landlord. Sometimes a conversation with another person is all it takes to overcome an obstacle. There are no guarantees, but if you explain your circumstances and ask a potential landlord for a little help, simple human decency can work and save you.