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Poor Credit and Application Approval

Your credit may not be good as you might think.

What is Credit?

Credit can be described as the ability to access goods or sums of money with the understanding that it will be paid back or paid for at another agreed upon time. Maintaining good credit is very important to establish financial stability. Companies who lend money such as lenders, merchants and service providers also known as Creditors (those who provide the credit) provide their “lending” services based upon their confidence in your ability to pay it back. A common misconception is that if you work and make good money that you automatically have good credit and that is not true. Credit is determined and based solely upon your payback ratio. If you take out a line of credit or a credit card and make your payments in the amount promised and on the specified date then yes your credit score should be on the higher side. However, if you make the same amount of money, but do not pay your bills on time or do not pay the amounts owed then you will have lower credit.  The three major independent credit bureaus are Experian, TransUnion and Equifax. Creditors such as banks, credit unions and credit card issuers report your borrowing repayment information to one of the three major credit bureaus.

Your Credit & You

If you have collections, bankruptcies, car repossessions, unpaid medical bills, unpaid student loans, child support and/or numerous inquiries (specifically from payday loans) that means that your credit score could be at risk, if it is not already. Unfortunately, this may give a potential landlord the wrong impression during the risk assessment of you becoming a tenant. Payday loans are definitely not something you want all over your credit report. Payday loans typically signal that you are or were unable to pay something back with your steady income from your employer. Logically, if you cannot maintain your current bills with your source of income it can send a signal to your prospective landlord that you will either fall behind on payments or may not be able to pay at all. Having multiple inquiries from credit lenders radiates to landlords that your income is not sufficient enough to cover your current expenses. If you cannot cover your current expenses, why would they believe you would be able to pay your rent. Prospective landlords want to see financial stability within any applicant.

Renting with Poor Credit

First, when looking to rent with poor credit you should look for second chance apartments, credit friendly apartments or apartments that do not factor credit into the decision. Another alternative would be to work on your credit prior to moving, but this is not always easy to do and may not be obtainable in the time frame you need so looking for housing that caters towards residents with poor credit may be your best option.

Lines of Credit

Second, try to create a credit account and show that you are on good terms with them. Ultimately,  this will be beneficial for you because it shows you’re able to make timely payments based on an agreement. However, this does not mean accepting a line of credit from anyone. When accepting credit you always want to read the fine print so that there are no surprises. You need to know the monthly payment amount and the interest rate that comes with the line of credit. Make sure to ask if there are any additional fees that pertain to purchases or withdrawals. You don’t want to damage your credit while trying to build it.

Demonstrate Your Reliability & Credibility

Third, remember that ultimately, landlords are evaluating the risk of unpaid rent. So, your main priority is to show that as a renter you are a low-risk applicant. A great way to demonstrate your reliability and credibility is to bring in your rental history ledger. Hopefully, this will show them that you have a positive rental history. Another option would be to bring in more than the requested number of check stubs and copies of the previous year's tax returns to show a steady flow of income and increase credibility. Having steady income and longevity on a job will help to overcome a bad credit situation especially within second-chance properties.

Cosigning is a Possibility

Fourth,  you may need a cosigner if the prospective landlord will allow same. A cosigner does not have to live with you, but they are equally responsible for making sure that rent is paid on time. Oftentimes cosigners are required to make 4x the rent amount because the landlord has to factor in the expenses of that individual person aside from you. Since the cosigner has expenses as well the landlord needs to be able to determine that aside from that person's individual expenses that they would still be able to help you if need be. 

Higher Security Deposit

A higher security deposit may be required if you have poor or little credit history. While this may require more upfront costs, it could mean the difference between your ability to move or staying where you currently reside. Higher security deposits are usually put in place because the prospective landlord wants to be able to cover unpaid rent if you are not able to finish the duration of your lease.

Why is Credit Important & Why Do I Need It?

Good credit is important if you need to borrow money for a major purchase such as your first home or a new car. It is good if you need to make a large furniture purchase or have an emergency and need access to funds. Credit is intended to help make some purchases easier. Better credit means better terms and interest rates. Some credit cards even come with rewards and benefits for responsible users. Credit shows businesses, prospective landlords, and others that you are able to be financially responsible. We have to remember that the people we apply for credit with do not know us personally or our habits, so they only have our credit upon which to make a basis. Credit is a great way to buy what you need now, but pay for it later over time. Credit is definitely important to securing good financial health and stability. Don’t ruin your credit because you never know when you might need help.

Learn more about:

How to be approved for and apartment

How to pass a background check

How to find the right apartment

Application Evaluation

First time renter

Have questions? just check out our Housing application FAQ page

Disclaimer: This is being provided as a general service for the public and not specifically relevant to the properties associated with this website. This is only for common knowledge and does not assume any responsibility.

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