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Everyone knows you need a good credit score to get a mortgage but what about renting? What credit score is needed to rent a house and how do landlords check that? We’re going to cover these questions, as well as what else landlords are looking for in a credit check. We’ll even talk about what to do if you want to rent a place but have a bad credit score. Let’s dive right in.
When you apply to rent a house, potential landlords want to know that you will be a responsible tenant. That means paying the rent on time and taking reasonable care of the property. To help them determine this, they typically run a credit check. In addition to credit score, landlords also look at the entire credit report. They also typically do criminal and sexual offender background checks, residence and eviction histories, and employment verifications and histories. According to most sources, while the specific minimum required FICO credit score will vary with the landlord, typically you can expect it to be between 600 and 620.
Some houses that are particularly desirable may have several applicants. In this case, the landlord will have her choice of tenants. All other factors being equal, the higher the credit score, the more likely the landlord will choose to rent to you. Pulling a copy of your credit report from all three bureaus can help you know your score, as well as give you an opportunity to check and dispute any erroneous negative information before filling out the rental application.
What does a landlord look for in a credit check?
The landlord primarily wants to be sure you haven’t walked out on any major obligations. Credit.com lists three factors on your credit report that will be dealbreakers for many landlords. They are:
- Car repossessions
- Credit card charge-offs
- Accounts currently in collections
Other red flags
Landlords also will seek to verify employment and determine whether you’ve been convicted of a crime or previously evicted from a rented home or apartment. A past eviction may disqualify a potential tenant with some landlords; with others, if the eviction was a long time ago and other aspects of the application are good, the tenant will be accepted. A pending bankruptcy is also a red flag for the landlord because bankruptcy could relieve the tenant of all obligations, including the rent. If the bank has foreclosed on a previous home or if the IRS is garnishing wages from back taxes, many landlords may deny the application.
If credit is borderline, some landlords take into account whether the credit problems have been longstanding or are situational. Supermoney quotes one landlord as saying that if he sees a longstanding pattern of weak credit, he will not rent to the applicant. But credit that has dipped because of a specific life event such as a divorce or illness will not disqualify the applicant.
Do landlords use TransUnion or Equifax?
Which credit bureau landlords use — Transunion, Equifax, or Experian — depends upon their individual preference. All three bureaus offer credit screening products and services to landlords which ask that the tenant initiate the check. Some landlords do not use online credit screening services, themselves, but will request that you bring a copy of your credit report with you.
Can I rent a house with a 500 credit score?
Maybe. Landlords also care about your income. If you can demonstrate that you have more than enough money to cover your monthly obligations, including the rent, you may be able to overcome a low credit score. Typically, landlords like to see that your monthly debts do not exceed 50 percent of your gross income. Having a lower debt load might help you overcome a poor credit score. If your scores are low because of one unfortunate life event, you might write a letter of explanation. If the event happened several years back and you have a good payment since then, the landlord may accept you.
Finally, not all landlords check credit. In fact, Lenders Network quotes a TransUnion study of individual landlords in which 57 percent said they did not check credit, thus credit scores are irrelevant.
How can I rent a property with bad credit?
Bad credit will limit your options but may not necessarily keep you from renting any house. Here are a few options for renting with bad credit:
- Try renting from an individual landowner, more than half of whom do not perform a credit check. Even if the individual owner does do a credit check, he will be more likely to hear you out. You can find individual owners or Craig’s list, through word of mouth, by driving around the neighborhood to find a “For Rent” sign, or in the classified section of the Sunday newspaper, according to Lenders Network.
- Find other means to prove that you can and will pay the rent. For example, bring proof of income, such as pay stubs or tax returns. Alternatively, offer to pay cash for half of the lease upfront or to pay a larger security deposit. Or agree to have the rent automatically deducted from your bank account each month.
- Find a cosigner who has good credit. This person agrees to be responsible for your rental obligation if you default.
- Find a roommate or move in with a roommate who already has a lease.
- Bring letters of recommendations from others with whom you have had financial dealings that tell of your timely payment. This works especially well if you can obtain a reference from a previous landlord.
- Do research before putting in an application. Research might include asking around to determine how flexible the landlord might be with credit scores. It also includes being sure the places you apply are those where you most want to live. Narrowing down the number of applications is important because some credit checks result in a hard pull. If you have several hard pulls, your scores will fall even further.
- Look for a house in a lower price range. This will improve your debt-to-income ratio, which may make your credit score less important. Landlords who lease houses in a lower price range may also be more flexible, Nerdwallet says.
What happens if I fail a credit check for renting?
If you still want the house, find another way to prove you will pay the rent such as offering more cash upfront or providing a letter of reference from a previous landlord. Another alternative is to find a cosigner. You might also try to rent a different house, looking for an individual landlord who will not do a credit check or finding one with a roommate who already has a lease.
Under some FHA programs, you may actually qualify to buy a home when you can’t rent one. If you have a 10 percent down payment, you may be able to obtain an FHA loan with a score as low as 500. If your score is as high as 580, you may qualify with a 3.5 percent down payment.