Don’t let a toxic credit score stand in the way of a new apartment.
A new U.S. Congressman made news earlier this month for being denied an apartment rental over a low credit score.
Recently-elected Maxwell Frost (D-Fla.) went public over his plight in early December, noting that his application for an apartment in Washington, D.C. was denied due to “bad credit.”
“For those asking, I have bad credit cause I ran up a lot of debt running for Congress for a year and a half,” Frost tweeted on December 8. “I didn’t make enough money from Uber itself to pay for my living.”
Frost worked seven days a week, 10-12 hours a day in the run-up to his election, which negatively impacted his finances. “It’s not sustainable or right but it’s what we had to do,” he stated in a separate tweet.”
The Problem with Bad Credit and Rental Scenarios
If a U.S. congressman can’t land an apartment due to bad credit, that’s a societal problem. Yet it’s business as usual for landlords who screen rental applicants.
“In recent years, as the rental market has become increasingly competitive, more and more landlords are looking at credit reports and scores for prospective renters,” said Freddie Huynh, Freedom Debt Relief vice president of data optimization. “Credit profiles paint a picture of creditworthiness, but also one of overall financial responsibility, so they give landlords some better sense of how likely a person will be to pay their rent on time, every time.”
Consequently, having decent credit is a huge issue for U.S. rental consumers.
“Your credit could be what stands between you and getting the apartment or home lease you really want,” said Consumer Recovery Network president Michael Bovee.
The “perfect rental place” isn’t just the feel of the space or the amenities that are included. To apartment hunters, getting a good place to live means more than an apartment’s layout.
“The place you get approved for can mean 30 or more minutes less commute each day to work. It can impact the schools your children go to,” Bovee said. “Thus, landlords are definitely looking at your credit before they determine whether to approve your application.”
How to Fix the ‘Bad Credit’ Problem
Getting a good apartment with weak credit is certainly not ideal – but it’s not a deal-breaker, either, as long as you tackle the issue head-on.
The following steps will get you going in the right direction.
Know the “breaking point.” Nationwide, the average credit score for an approved rental applicant is 650 or above.” That said, location can matter a lot with a rental deal.
“In competitive rental markets and cities with high median incomes, landlords have been known to insist on scores that are 700 or higher,” said fintech firm FairPlay founder Kareem Saleh. “For renters, aim for a credit score above 650. If you have a low score, try to supplement your application with proof of past rental payments, letters of recommendation from previous landlords, proof of savings, or a co-signer.”
Take dead aim on good credit. Rental consumers need to keep their credit reports in good shape, and maintain fair to great credit scores (i.e., a 630 to 720 FICO credit score).
“There are places that will approve your application with a fair score, but there are also places that list their property as only accepting excellent credit scores (720 and higher),” Bovee said. “How you shape your credit scores to match the home or apartment you qualify for is often going to be based on the good credit habits you had leading up to your relocation plans.”
Resolve collection debts ASAP. If you’ve been evicted in the past, or still owe money to a property management company, resolve that collection account before applying anywhere new.
“You can often negotiate unpaid collection debts for less than what is owed,” Bovee noted. “This means you may not have to come up with all the money for the move, and all the money to resolve past debts, at the same time.”
Plan on waiting 30 to 60 days for your credit reports to be updated with the fact that you no longer owe on those collection accounts, Bovee said.
Check your credit reports. Consumer credit scores are calculated from the information that appears on your credit reports, so you’ll need to review all of your reports.
“Access credit reports from Equifax, Experian, and TransUnion (the three main credit reporting bureaus) for free, once a year, at www.annualcreditreport.com or by calling 877-322-8228,” Huynh advised. “If you find any errors, follow the directions on each agency’s website to correct them.”
Use credit wisely. While it may be tempting to stop using credit altogether thinking that it will help your credit profile, avoid doing so.
“A history of making payments on time is exactly what’s needed to develop and improve credit scores,” Huynh added. “Making payments on any revolving debt (credit cards) or installment loan (e.g., student loan) is very important. With credit cards, know that one card you use is plenty to help and protect your credit.”
Overall, it’s fine to charge just a small amount each month that you will pay off in full and on time. “Just don’t charge more than that,” Huynh said.