While there’s no universally required credit score needed to rent an apartment, having a solid credit score can certainly help your chances of a landlord handing you a set of keys. In general, a landlord will look for a credit score that is at least “good,” which is generally in the range of 570-739. However, that can vary by landlord or property manager, as well as the location in which you’re renting.
Read on to learn more about how your credit score can affect renting an apartment — and how you can approach renting if you have a lower credit score.
Related: Mortgage pre-approval need to knows
What Credit Score Do I Need to Rent an Apartment?
Truth is, the answer to what credit score you need to rent an apartment is a bit squishy. In general, you’ll have a better chance of approval if your credit score is at least deemed “good.”
What’s considered good? Credit scores are generally classified as follows per FICO (keep in mind that different scoring models may vary):
- Exceptional: 800-850
- Very good: 740-799
- Good: 570-739
- Fair: 580-669
- Very poor: 300-579
There also are variables that can affect whether your credit score qualifies you to rent an apartment. For example, if you live in a city where there is huge demand for apartments, landlords may give preference to those with higher credit scores.
Can You Get an Apartment if One Person Has Bad Credit?
If one person has bad credit, know that it will likely make it tougher for you to get an apartment. Landlords have a lot of leeway and can follow criteria of their choosing. Still, it’s not impossible even if it is trickier. One smart strategy in this situation is to put the lease in the name of the person whose credit and income are best. You could also offer to show your income or provide a reference.
What Landlords Look at On Your Credit Report
When your landlord reads your credit report, they will be looking for clues about your financial health and habits.
Of much importance is your debt-to-income ratio. In a nutshell, this is the amount of your monthly pre-tax income that gets spent on debt payments. It’s certainly not news to you that filing for bankruptcy can have a negative impact on one’s credit. A landlord also may be spooked if you have hefty credit card balances.
Your credit history disclosed on your credit report also may include your rental history as some landlords and rental property managers share your business with the credit bureaus. This can be a plus if you’ve been doing the right thing; if not, this can work against you. Too many hard inquiries also can raise red flags for a landlord. This is because frequently applying for different types of credit could suggest financial instability, which increases risk in the eyes of lenders — as well as landlords.
How to Rent an Apartment with a Lower Credit Score
Just because your credit score isn’t stellar doesn’t mean you’re resigned to sleeping on a friend’s couch or living with your parents. There are ways to rent an apartment even with a lower credit score.
1. Pay a Higher Security Deposit
One way to show that your credit history is just history is by offering to make a higher security deposit. Say you are required to pay first and last month’s rent upfront. To sweeten the deal, maybe you tack on a couple of additional months of rent. If you want to instill confidence in your potential new landlord, this might do it. Just make sure you actually have the room in your budget to offer up the cash.
2. Get a Co-Signer
While getting a co-signer may put a damper on feeling like you’re finally a grownup, it may be worth sucking it up and getting a creditworthy parent or other trusted individual to co-sign for your apartment. This can give your landlord peace of mind if someone is willing to pay the rent on your behalf if you’re unable to.
Just keep in mind that your co-signer will be on the hook if you drop the ball and that co-signers generally must meet even steeper credit score and income requirements.
3. Play Up Your Income
Maybe your credit score is nothing to brag about, but you’ve worked hard and now have your finances in order, with solid savings and a good income. If you could show that you earn three or four times your rent on a monthly basis, that might divert attention from your lousy credit score. Additionally, if you have a solid stash in your savings account, that can also give your landlord assurance that you have the funds to cover your monthly rent.
4. Consider Getting a Roommate
Adding a roommate to your lease or rental agreement can increase your creditworthiness and your qualifying income. This is especially the case if you can find a roommate with good credit — and get your landlord to pull their credit first.
Benefits of Good Credit When Renting an Apartment
A landlord needs more than their gut instinct to help them determine who to rent to, which is why a credit score carries a lot of weight when it comes to getting your rental application approved. A good or — better still — an excellent score can give landlords the confidence to consider you for the apartment, especially if all other signals they get when checking on your background indicate they should give you the green light.
Having a solid credit score can help you to snag the apartment you want, and avoid the hassles associated with trying to secure an apartment when your credit isn’t as great, such as getting a roommate or a co-signer. Especially if you live in a city with a competitive rental market, a good credit score can be a serious edge.
How to Monitor and Keep Track of Credit Scores
Ideally, you want to check your credit and get a copy of your credit report before you start apartment hunting. It’s important to know where you stand and, if there are any errors, you want to fix them right away.
Until April 20, 2022, you can get free weekly credit reports from the three national credit reporting agencies, Equifax, Experian and TransUnion. To get your free reports, simply go to AnnualCreditReport.com.
While your credit report provides information on your various credit accounts and their balances and your payment history, it does not include your credit score. You can check your credit score by looking at a loan or credit card statement or through an online credit score checker. You can also buy a score directly through credit reporting companies. Even if you might have checked your credit score not that long ago, don’t skip doing so again — your credit score updates every 30 to 45 days.
If your score is low, consider taking steps to improve it before jumping into your apartment search. Actions like paying down credit card balances and making sure you don’t have any more late or missed payments for a stretch can show progress.
What’s Expected in 2022?
According to an outlook on the U.S. rental market published by the property management platform ManageCasa, demand for rentals will grow in the coming year. In fact, ManageCasa writes that the “rise in rents for the rest of 2021 and 2022 might be surprising to some.”
The report indicates that the U.S. rental property market is currently experiencing severe shortages, heightened demand and high property prices, while those looking to rent are competing with a wealthier pool of renters. This is driving up prices.
Further compounding the situation is the fact that housing prices are so inflated that the percentage of people who can afford a home has already dropped off and likely will continue to do so, according to Forbes’ predictions. This could lead to a rental market that is even more competitive, which may not bode well for those with less than stellar credit.
The Takeaway
You’ll want to shoot for having a good credit score — generally in the range of 570-739 — to get an apartment. While you may be able to still get an apartment if you don’t have solid credit, it will make it more challenging with the competition you’re likely to face.
If you have the luxury of time, do what’s necessary to improve your score so that when you begin your search you’ll be an ideal candidate.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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How to buy an apartment
Home sweet home doesn’t have to look like what it does in the movies: four bedrooms, wraparound porch, white picket fence and golden retriever lounging by the pool. Home can be an apartment, especially in urban areas.
City dwellers, singles or anyone who doesn’t need the extra space (or the responsibilities) of a single-family home may want to learn how to buy an apartment. The mention of “apartment” usually means a condo or co-op.
Learn the differences and real estate options that may be available. Happy hunting!
Related: How much are closing costs on a new home?
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Both a condominium and a housing cooperative involve multi-unit buildings, but there are key differences between a condo and a co-op.
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When you buy a condo, you own the unit. The exterior of the units and land are usually considered common areas, owned collectively.
If you buy into a co-op, you don’t own your apartment. You purchase shares or an interest in the entire building. So you don’t “buy” a co-op apartment; you become a shareholder in the corporation that owns the co-op.
You’ll usually sign a contract or a lease agreement that allows you to live in one of the co-op units.
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Both condos and co-ops answer to an oversight body. For condos, it’s a homeowners association. For co-ops, it’s the residents who own shares in a nonprofit corporation that owns the building.
When it comes to buying and selling, the co-op association can influence the deal. Most require a prospective buyer to be approved by the co-op board.
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Co-ops tend to cost less per square foot and often have lower closing costs. But some lenders aren’t keen on co-ops or require higher down payments, and some co-op documents outright prohibit financing.
Co-op monthly fees tend to be higher than condo fees. A co-op shareholder’s fee could include payments for the building’s mortgage and property taxes, security, amenities, and utilities.
Condo owners pay property taxes on their unit, which may provide them with a tax deduction.
With a co-op, the monthly dues for maintenance include the property taxes associated with the units, technically owned by the corporation, which receives one property tax bill. Each resident’s portion of that bill is tax-deductible.
The New York City housing market teems with co-op buildings, starting with The Gramercy, built in 1883 in Manhattan. (A two-bedroom might set you back more than $2 million, but you’ll gain a bite of elegant history, celebrity neighbors and a key to New York City’s only private park.)
Then there are the 1,300 or so income-restricted co-op buildings in the Big Apple, where tenants bought their rental units for a nominal fee from the city, rehabbed the buildings and have remained for several decades.
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Unlike a co-op apartment or a condo, houses stand alone, and some folks prefer that breathing room. Hey, communal living isn’t everyone’s cup of tea. Along with the home, the owner owns the land that the home sits on as well as any detached structures on their property, like a garage or pool house.
Similar to a condo, homes may require HOA fees that cover costs relating to security, maintenance and access to any amenities in the neighborhood.
A house typically will cost more than a condo or co-op apartment, but it will usually appreciate faster than a condo.
In October 2020, the National Association of Realtors pegged the average sales price of an existing single-family home at $348,700 and average sales price of an existing condo/co-op at $315,300.
With a house, there’s that yard to mow. Then again, you can have your own garden.
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While buyers can search for an apartment on their own, professional help is often imperative. Whether you’re a first-time buyer or a seasoned one, listing your top priorities can help an agent narrow down the options. Examples of things that could be important to you include:
- Proximity to work or school
- Local crime rates
- Parking, traffic and transportation
- Cost of living
- Nearby amenities (gym, grocery store, shops, etc.)
When choosing a real estate agent to work with, it can be smart to speak to a few and ask them key questions to determine if they’ll be a good fit.
Think of it as a job interview and review their qualifications, learn more about their area of expertise, and find out how much it’s going to cost to work with them. Some questions worth asking are:
- How many clients do you currently work with?
- How many apartment units have you helped clients buy?
- Do you have references?
- What is your availability to show apartments?
- How quickly do you typically respond to emails and phone calls?
- What are your fees?
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Renting is not always cheaper than buying, but at the same time, any type of homeownership comes with added costs that renters don’t have to incur. Before deciding whether to buy or rent, it’s best to ask yourself some important questions. And then you might want to check out a rent vs. buy calculator.
There are many calculators available, but they can only provide a loose idea of what may be a better deal long term, so that’s worth keeping in mind. Each calculator will have a different methodology.
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While the practicality and value of buying an apartment will depend on each person’s needs, goals, and financial situation, there are a few ways to tell if buying an apartment is a good opportunity.
Not only will buyers want to find an apartment that is a good fit for their current lifestyle, but they may want to get a feel for if they have a good chance of making a return on their investment if they choose to sell.
Consider mulling over the following factors before making an offer on an apartment:
- Reserves: Boards of condos and co-ops often use reserve funds in case of big maintenance or renovation projects and community emergencies. Are the reserves healthy? If not, you risk a spike in dues or a big special assessment. It’s smart to ask your real estate agent for help looking into reserve funds.
- Maintenance: How much is this fee each month? Is it within my budget?
- Location: Is the apartment in an area that is both convenient for the buyer’s lifestyle and has resale value? How far from work is the apartment? What is the neighborhood like? Is there public transportation close by? Is the neighborhood growing in popularity? Have housing prices been rising or dropping in recent years?
- Noise levels: Community living can be noisy, especially if the property is in a major city with a lot of hustle and bustle going on. Before making an offer, walk around the neighborhood early in the morning, at night, and on the weekends to gauge the noise, traffic, and other potential annoyances.
- Safety: Is the apartment building as a whole safe? What security measures are in place? How safe is the neighborhood?
- Building age: How old is the building? Are costly repairs and updates in the near future? It can be helpful to have an architect or an engineer provide a report on the building before a purchase.
- Parking: Is a parking spot included? Does it cost money each month to park a car? Will the car be in a safe area like a private garage?
gpointstudio/istockphoto
Soon-to-be apartment buyers will want to understand that getting their finances in order and securing a mortgage are some of the final steps toward the goal.
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Before applying for a home loan, it can be wise for the property hunter to review their credit report and check for any errors they may need to dispute. If there are errors to clear up, they won’t want to deal with those at the last minute.
To remove any errors found on a credit report, consumers can write a letter that disputes those errors and send it to the appropriate credit reporting agency (TransUnion, Experian or Equifax).
The letter should also be sent to any information providers, such as banks or credit card companies, that reported the inaccurate information.
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Next, before making an offer on a home, spend some time calculating how much the mortgage and any fees associated with buying an apartment will add up to each month. Confirming that these costs are within budget can make budgeting and managing expenses easier in the future.
It can be worthwhile to also estimate how much will be spent on utilities monthly and any maintenance projects that may occur, as repairs will be the responsibility of the apartment owner.
Nuthawut Somsuk/ istockphoto
Finding the right home loan shouldn’t be as hard as it was to find the perfect apartment.
Are you ready to buy an apartment? If so, are you aware of the differences between a condo and co-op, the financing and monthly fees, and the comparisons to buying a single-family home? The right purchase and lender can make all the difference.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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