How to Rent a House with Bad Credit

Written by Robert Ferry on March 28, 2022
How to Rent a House with Bad Credit

Are you wondering how to rent a house with a bad credit? We will tell you everything that you need to know in this article.

Your credit score is likely to become a significant consideration when looking for a house to rent. Before renting or leasing their properties to you, most landlords and property management companies currently require a credit check.

Even if you have a solid income and a perfect rental history, some landlords may refuse your rental application if you have a poor or bad credit score. Other landlords will merely look at your credit history to determine if you have any tainted rental-related issues.

Most landlords are only interested in knowing if you've ever been evicted for non-payment of rent or violating a lease agreement. That isn't to say that if you have bad credit, you won't be able to rent a decent home. You can, but there are a few things you must do before.

What Are Some Common Causes of Poor Credit?

Having a low or negative credit score does not indicate that your finances are in trouble. Credit score requirements are complicated, and you can have a negative credit score for a variety of reasons:

  • Late or missed payments: Late or completely missed payments on some of your utilities, bills, or credit cards will significantly impact your credit report.
  • A short credit history:  When the majority of your accounts are new, there's a chance your credit score is negatively affected.
  • Numerous credit applications: You lose a few points on your credit score when applying for a new loan or credit card.
  • When you have too much credit: This frequently occurs when your credit card balances are excessively high. Even if you pay them off every month, you may still have a poor credit score.

Additional reasons might contribute to a poor credit score, but these are the most frequent. It's a good idea to keep an eye on your credit report to determine which of the items listed above you can improve.

The majority of decent credit ratings fall between 700 and 850. According to most property managers, a minimum score of 600 is what you are required to have to rent a suitable property. If your credit score is less than that, you may have difficulty renting the home you want.

Tips on How to Rent a Home with Bad Credit

It would be pretty easy for you to get a good house if you have an excellent credit report. However, if you have a poor credit history, there are some steps you may take to increase your chances of getting the house you desire.

Get Your Full Credit Report

When you're ready to start looking for a house to rent, the first thing you should do is check your credit report. You'll be better prepared to deal with a landlord if you know exactly what your credit history looks like.

Check with each of the three credit bureaus just in case a landlord decides to get your credit report. FICO, Experian, and TransUnion are three respected credit bureaus. You can subscribe for free credit reports received once a year. If you encounter any inaccuracies, it's advisable to have them corrected before going house hunting.

A bad credit report implies more negative factors in your credit report. The negative factors portray that you are a high-risk borrower or who does not don’t pay your debts on time. When you have fewer negative points on your credit report, your chances of getting a house improve significantly.

A low credit score in the range is usually a sign of bad credit. A credit score between 0-600 means you have a bad credit history. Some of the signs that your credit score has gone bad are by:

  • When you receive communications from some of your debtors.
  • Financial institutions deny your application for a credit card or loan.
  • When the interest rates on your existing accounts rise, leading to unexpected cuts to your credit limits.

A good credit score shows you are a dependable borrower, and more people will be willing to trust you. It will be easier to get loans, mortgages, credit cards, and property approvals.

Get a Co-signer or A Roommate for House Bad Credit

You may come across a landlord who is still not convinced that you’ll make the rent payments with a bad credit score. Getting another person with a good credit score to co-sign the house lease with you should do the trick. The other party can be a family member or a friend.

You can have a co-signor sign on your behalf, but you must be sure that you will be able to make the payments. If you can't keep up with the payments, your landlord will require your co-signer to pay whether or not they live with you. Remember that non-payment on your side will impact your co-credit signor's score.

If finding a co-signor is difficult, consider finding a roommate with a higher credit score. You can also sublet from someone who agrees to put their name on the lease.

Another alternative is to find a roommate who is already a tenant in the house, meaning the person on the lease has a strong credit history. Your roommate will be pleased to divide the bills because it will allow you to save money.

Recommendations From Your Former Landlord

There's no need to be worried if your potential landlord notifies you that they'll run a credit check beforehand. Request a recommendation letter from your former landlord if you already have a low credit score. The letter should show that you could make rent payments comfortably in your previous house.

Here are some things you may request your former landlord to include in the recommendation letter:

  • You never missed or delayed a rent, bill, or other fee payment.
  • that you followed the rental agreement to the letter
  • How well you looked after the rental property
  • How successfully you maintained your relationships with your fellow rental house neighbours.
  • You and the landlord/property management firm got on well together.

Inform them politely that, while your credit score isn't ideal, you're working hard to improve it. Also, let your potential landlord or the rental company know that, despite your low credit, you've never missed a rent payment.

If you have any outstanding bills, you should pay them off first. You might ask the company in charge of the rental property to print a statement showing no outstanding payments. If it's a specific person, you can make the same request.

Your landlord may also be ready to be patient with someone who has paid off a mortgage in the past. It will be easier to persuade them that you can also manage your rent payments if you can handle your mortgage payments.

Even with bad credit low ratings, most landlords seem to have greater faith in you if you've previously owned a property. The fact that you may be able to qualify for and afford a mortgage will immensely benefit you.

Request For a Shorter Lease for Rental Home

Requesting a short-term lease for the home may also help. Simply inquire from your landlord about starting with a shorter lease agreement. Within that time frame, you'll have persuaded them that, despite your poor credit, you can still make your rent payments.

If your payments are good throughout that time, they may consider renewing your lease for a more extended period. If your payments are late, they won't have to worry about evicting you after your short lease expires.

Make Some Financial Concessions

Find out if there's any way you can make the landlord's decision easier. You may ask if you can pay a larger deposit or pay 2-3 months' rent in advance. However, you must have complete faith in the landlord, as you may change your mind about the house, and finding a way to get your deposit back could be a headache.

If you have a negative credit score and plan to start renting a home, it is good to start saving money now. These funds will assist you in covering the bulk of the upfront expenses that landlords may request in exchange for your bad credit.

Be willing to submit certain documents, such as proof of income, if the landlord requests them. Income documents can easily persuade the landlord that you have adequate income to fulfil your monthly rent payments on time despite your bad credit. However, this means you should be earning at least 2-3 times what you expect to pay in rent.

Another approach to persuade your landlord that you can pay your rent is to establish automatic rent payments from your bank account. Thanks to the automatic payments, your rent will always be paid when due.

The landlord may also be in desperate need of a tenant who can move in right away. Consider accommodating them and moving in even if you were not in a rush. See what other concessions you could make to soften their stance on your low credit.

Avoid Rental Property Companies like Zillow

When looking to rent, you'll discover that rental companies have more and stricter regulations than individual landlords. While dealing with individual landlords is more manageable, most companies that deal with rentals appear to have policies that are hard to overlook.

Most landlords will not have time to perform credit checks, and those who do may be more ready to make exceptions. For a negative credit check, they will accept a reference from your previous landlord or proof of income.

You might even come across a landlord who has flexible payment plans and policies if you make a good impression on them.

Where to find rental houses owned by individuals:

Ask real estate agents

Most homeowners, especially those who do not live in the area, use property rental agents. They usually pay real estate agents a commission for helping them with home management leases.

Why not contact one of the real estate professionals to locate a suitable rental property for you? Once you've established contact, inquire about the landlord's requirements for approving a tenant. If they do not do credit checks, you will be able to rent a home.

If the landlords run credit checks for renters, you'll have a greater opportunity of persuading them of your solid rental history or steady income.

Check the classifieds

You can find rental properties in the classified section of your local newspaper or in the area where you want to live. Some landlords use this resource for classified ads when advertising vacant rental houses.

Some newspapers have also gone online and listed rentals in their classified ads, which you can check. Sundays are the best days to review the ads because that is when most individuals advertise.

Browse through Craigslist

Craigslist offers a housing section where most homeowners list their vacant rental units. By going to the top of the page and clicking on the bar in the centre, you can go to the area you want.

Individual landlords are challenging to find on Craigslist, and you may have to filter through a long list, but it's worth the try. Several years ago, most people used Craigslist to find individual landlords.

Don’t Lie About Your Low Credit

Most landlords will have more confidence when you don't lie about your bad credit scores. Explain to them what caused you to have a low credit score and how you're working to improve it. Most people can understand if there is a good reason, such as a divorce or a foreclosure.

Most will agree to rent the house to you if you can show them that you are working hard to improve your credit score. Assure them that even if your credit scores are low, you will be able to pay your rent on time.

You can even get statements for some of the bills you've recently paid off to show your landlord that you’re making efforts to improve your credit score.

Landlords should obtain your permission before conducting a credit check on you. If a landlord has not informed you that they plan to run a credit check, they are unlikely to do so. As a result, if they haven't asked, there's no need to share your credit situation with them.

When you don't disclose your credit information, it doesn't mean you're a fraud, but there's no need to arouse unnecessary suspicions.

Scout the Rentals Market for Favourite Areas

Landlords in areas with many vacant houses will be ready to relax the restrictions a little. Some people will agree to forego a credit check to secure a tenant for house bad credit.

So, if you're aware that you have a low credit score, these are the areas you should consider.

Frequently Asked Questions (FAQs)

Do Evictions Show on Your Credit Records?

Evictions do not appear on your credit report, but they show in your rental history. Apart from credit checks, most landlords will contact previous landlords to inquire about your rental history.

A tenant screening company can provide landlords with your rental history. However, if you had due rents or fees and your former landlord sold your debt to a collection agency, a collection account will appear on your credit report.

What Exactly Will, A Landlord, See from A Credit Check?

When a landlord pulls up your full credit report, they will likely see your credit score, collection actions, unpaid accounts, bankruptcies, and late payments.

However, the portion that most landlords are worried about are those that can demonstrate whether or not you are a trustworthy tenant.

How Is My Credit Score for Renting Calculated?

Payment history, the amount outstanding, new credit, the categories of credit you hold, and the length of your credit history will all affect your credit score.

Most landlords will examine the amount owed and your payment history when selecting whether or not to rent you, their property.

How Can You Improve Your Low Credit Score?

Because credit scores are prone to change, there are several ways to manage your credit score.

  • Always strive to pay your outstanding balances in full.
  • Every time you use your credit card, your card utilization rate increases, so try to make significant cash purchases.
  • Talk to your creditors as you can reach a mutual agreement like how to reduce the interest rate or the monthly payments.
  • Accelerate payment of your debts when your income improves, or you get extra income.
  • Consider reaching out to certified credit counsellors who can help you develop a sound financial plan.

Who has access to your credit scores?

The Fair Credit Reporting Act establishes a list of people who access your personal credit score for "permissible uses." Here are a few examples:

  • Your potential employers can access your credit scores, with your permission, of course.
  • Prospective property owners or landlords but still with your permission
  • Insurance companies
  • In case you’re applying for credit, credit grantors
  • Collection agencies (like Equifax) if they need to collect a debt
  • Anyone else you allow to access, but with written permission from you.

Conclusion

While it's true that having bad credit makes it hard to rent a home, it doesn't mean it's impossible. Most landlords will give you a chance if you have the proper evidence that you're working to improve your low credit score.

Don't be scared to pursue a rented house you like in a favourite area because of bad credit, primarily if you use some other tips mentioned in the article.

Article written by Robert Ferry
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