When you’re on the verge of starting an apartment search, your credit report is typically one of the first factors a landlord or property manager examines. It may help you spend less time searching for apartments, experience less stress, and face fewer apartment application denials when you know what credit scores most landlords and property managers require and what alternative paths to finding an apartment exist when your credit score does not meet their requirements.
There is no universal minimum
One of the most important concepts to grasp as you begin researching this subject is that there is no defined minimum credit score required by law to rent an apartment. Mortgage lending has established rules that apply across the country; however, the rental real estate business operates based on the discretion of each landlord and/or property management company.
Some small independent landlord who owns just one building might never examine your credit history. On the other hand, some big corporate property management firms (i.e., enterprise community partners) may set a rigid credit score minimum threshold of 650 or higher.
That said, industry data provides a good reference point. In general terms, most professionals within the rental housing community, whether it’s a small independent landlord or a large national property management firm, tend to desire prospective tenants whose credit reports reflect a minimum credit score of at least 620 to 650.
Additionally, in many major metropolitan areas such as New York City, San Francisco, Boston, and Chicago, landlords and property managers generally set a de facto credit score floor of at least 680 and sometimes higher.
What landlords are actually looking at
Your credit score is just the starting point. Landlords will pull a full credit report and look for red flags beyond the number itself.
Most landlords are concerned about missed or late payments in your recent payment history, especially those that were related to rent or utilities.
If there are accounts on your credit report showing missed payments on previous leases or utilities, that will be more of an issue than having a low overall credit score.
Collection accounts (especially from former property management companies or landlords) typically disqualify any applicant regardless of their credit score.
High credit utilization shows stress with your finances and raises questions about whether you can consistently pay your rent.
Eviction records typically show up separately on tenant screening reports other than credit reports and usually raise the largest red flag.
What happens if your score is below the threshold
It’s possible to have a score lower than what a landlord wants and still qualify. Here are several ways you may be able to increase your chances of approval.
Increase your security deposit. Many landlords will allow an applicant with a lower score to approve their application by allowing them to put up more money (two or three months of rent) as a deposit.
Show evidence of steady income. The majority of landlords would like to see an income that is two to three times the amount of the monthly rent. If you make much more than twice the amount of the monthly rent, this could help improve your chances of approval.
Pay a few months of rent in advance. Some landlords will consider this; this helps offset the risk of a low credit score.
Find a cosigner. A cosigner with good credit agrees to be liable for the rent should you fail to pay. It is a big ask of the cosigner, however it is a very popular method to gain approval because your credit is too low.
Get letters of recommendation. Letters from prior landlords stating you paid your rent on time during a specific period of time carry great weight, especially if your credit report does not accurately portray how reliable you are as a tenant.
How to improve your score before applying
If you can afford to spend 30 to 60 days focusing on your credit prior to searching for an apartment, this may have a positive impact on your overall credit score.
Credit card debt should be paid down to lower your credit utilization. If you are using more than 30 percent of the available credit on any or all of your credit cards, lowering the outstanding balance to less than 30 percent will likely result in a higher credit score when your accounts are updated (usually around one month after the billing cycle closes) by each credit reporting agency.
Any inaccuracies found on your credit report should be disputed with each of the three major credit reporting agencies. An estimated 20 percent of consumers find at least one error in their credit reports. The correction process typically takes no longer than 30 days per credit reporting agency; therefore correcting errors during this time could positively affect your credit score.
If you are a current tenant (renter), consider submitting your rental payments to help improve your credit score. If you are making timely payments on your rent but those payments do not appear on your credit report, services such as Credit Genius can report that information to the appropriate credit bureaus.
What landlords see when they run your credit
Most landlords will use some form of tenant screening service as opposed to pulling directly from Experian, TransUnion, or Equifax. These services will compile a report containing all of the information they have collected about you including: your credit score, payment history, public records, past evictions, and sometimes even income verification.
The credit score included in a tenant screening report is likely a VantageScore rather than a FICO score, and it’s possible that the score used by the landlord could come from one bureau instead of all three. Understanding this point is important because it makes clear that there is the possibility of a difference in the credit score a landlord will see versus what your credit monitoring app will show you.
There are also many different types of tenant screening services utilizing proprietary scoring systems created exclusively for assessing rental risk. As such, these scoring systems may weigh a potential tenant’s payment history more heavily than in a standard credit score.
The bigger picture
Your credit score represents just one factor when applying for a rental unit, as opposed to being a final decision. The landlord’s ultimate goal is to determine if this applicant will be able to meet their obligation on time to pay rent and maintain the rental unit in good condition.
When an applicant has a high credit score, they have already established themselves as someone who meets both obligations. However, applicants with lower scores must demonstrate this ability through other means.
It is also ideal to improve your credit score before you need it. Therefore, even though you may be six months or more from your next potential lease signing, making consistently on-time payments, reducing your utilization ratio, and adding new positive information such as having your monthly rental payments reported to the major credit bureaus (rental payment reporting) will all provide you with significantly more options at least six months before beginning your apartment search.
