Can You Be Denied a Rental Home Because of Bad Credit?

Article Updated August 1, 2018.

The most well-known consequence of having bad credit is trouble getting loans or credit cards, but a low credit score can also make it difficult to find a place to live.

Landlords, especially large property-management companies, will likely check your credit report before approving your lease, and there are plenty of negative items that landlords see as deal breakers with potential tenants.

But don’t fret—you may still have options.

What is Tenant Screening?

Tenant screening is a process that many landlords will use when determining whether or not they should rent to you- bad credit or not. The tenant screening process will show the landlord if the potential tenant has a history of delinquent payments and it will give them a clearer picture of whether or not they will pay their rent to them on time and if they will take care of the rental property.

During the tenant screening process, the landlord may request the rental application, run a credit and background check, contact previous landlords, contact the tenant’s employer or speak to any references they were given, and they will also usually interview the tenant themselves in person.

Is Bad Credit an Automatic Rejection?

By most landlords’ standards, the minimum credit score to rent an apartment is 620. But many landlords look past the credit score and search for specific activity on a potential tenant’s credit report.

Ben Papale, a real estate broker in Chicago, Illinois, says judgments, tax liens, and collections accounts on utilities are almost always nonstarters, but medical collections and late credit card payments aren’t as problematic in the eyes of a landlord.

Barry Maher, a property manager in Corona, California, says the 2007 recession changed his mind on bad credit. Before, he never looked at applicants with bad credit because plenty of other applicants had good credit. Then suddenly almost all the applicants had a credit problem.

“I started looking at it more closely,” Maher says. “Particularly after the recession hit, I had people who had declared bankruptcy, people who had lost their houses. But I was still able to find some incredibly good people to rent to.”

It can be difficult to get into an apartment with bad credit, but there are a handful of things you can do to improve your approval chances. Use the seven tips below to help you get into that apartment or house you’ve been eyeing.

Find an Apartment with No Credit Check or an Independent Owner

Large management companies are less likely to consider applicants with bad credit, so you’ll want to look for a landlord or property manager who has a small operation—who maybe owns just a few units or properties.

“They’re a lot more open to considering special considerations,” Papale says. Large management companies are unlikely to make exceptions because that opens them up to the possibility of getting sued if someone in a similar situation applies for an apartment and is denied, Papale says.

If you’re dealing with an individual, rather than a company, you may have an opportunity to tell your story and explain why you’d be a good tenant. Doing so might just be what puts the rental application into your hands.

Explain in Person

Maher puts a lot of stock in personal interactions. He says he always makes reference calls himself—the one time he didn’t led to a terrible tenant, and he won’t make that mistake again. Now he knows there’s a lot of value in meeting potential renters before deciding.

“If they’re forthcoming and they meet with the person making the final decision to explain their case, they’re way ahead of the game,” Maher says.

Papale recommends renters with bad credit write personal statements to send in with their applications—to put the credit problems in context and make an argument for themselves.

It might even be helpful if they can show proof of prior rental history and rent payments to show they are reliable.

Be Open about Your Income and Savings

When explaining your personal situation, proof of a stable income can go a long way. Come prepared with pay stubs so you can show that you make enough to comfortably pay rent—rent should be less than 30% of your monthly income. Knowing you’re not strapped for cash will be a comfort to your potential landlord.

If you don’t have a steady income, but you do have a sizeable bank account, bring bank statements that show you have enough savings to pay at least six months’ worth of rent. A financial cushion is better than nothing, and it may bring an independent owner over to your side.

Make Advanced or Larger Payments

Money talks. Just like how showing your income can help your chances of getting into an apartment, making a large advanced payment can be a helpful gesture of goodwill. Paying a larger security deposit than requested or even three months of rent in advance will also elevate your renting potential in a landlord’s eyes.

Find a Roommate

If you don’t have your heart set on having an apartment to yourself, a roommate can be a satisfactory solution while you improve your credit. Find someone who is already secure in their lease, so you can move in with them without needing a credit check. Or find a landlord who will let you move into a new place with only your roommate’s name on the lease.

You can save money by splitting rent with a roommate, and your landlord will feel more comfortable having at least one person with good credit living in the apartment. Just don’t hang your roommate out to dry when rent is due.

Consider a Guarantor or Cosigner as a Last Resort

Having a friend or family member cosign on your rental application will make getting into an apartment a lot easier, but it can strain your relationship. If you choose this route, you’ll have to find a cosigner who has a secure income and good credit that they’re willing to put on the line for you in case something happens and you stop making rental payments.

You also need to be certain you will be able to pay rent every month. Missing a payment means your cosigner will be forced to pay it on your behalf, which can lead to a lack of trust. Nobody wants that, so again: make sure you can pay the rent!

Repair Credit for Future Apartment Hunting

Once you’ve gone through all the work to get into an apartment with less-than-ideal credit, take steps to avoid this situation in the future. You can repair your credit in about one to two years if you put your mind to it.

It’s important to check your credit scores and your credit reports from all three reporting agencies before applying for a rental. By doing so, you can not only proactively address any credit issues you have but also make sure you’re accurately representing yourself.

Credit scores fluctuate constantly, so keep an eye on your score. You wouldn’t want to fill out a rental application thinking everything’s fine only to have a landlord think you lied because he found issues with your credit report.

Get your credit score for free on Credit.com, with updates every 30 days.

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Image: iStock

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