Finding the dream home or apartment to rent might be a challenge. From going through numerous apartment tours, to the process of actually being approved for the place, renting sometimes seems like an impossible mission.
Do not give up yet, though! If you have already found what you are dreaming of, but unsure what comes next, keep reading as we have covered everything you should keep in mind when it comes to being evaluated for your credit score.
Credit scores are a three digit number on the scale between 300 to 850, which illustrates your credit risk. Essentially, the score demonstrates what is the likelihood that you will pay your bills on time or return any money borrowed (loans).
Credit scores are also used, outside of renting, to determine the interest rate you receive on a loan or credit card, and the credit limit.
While it's difficult to determine what is a good credit score, it is generally believed that a good credit score for renting is anything above 650. Additionally, people with credit scores lower than 620 may indicate a high risk of default on rent owed.
Do not panic yet, though, if your credit score is below this number. There are a number of other factors involved, such as the size of the apartment, your income, the amount of the rent, the local market conditions, and much more.
Something to have in mind, though, is that if your credit score is much lower than 600, the landlord may want to run an additional screening on your payment history, or ask you to use a guarantor.
Now that we have covered the basics, we can move onto the main question -
Why do landlords look at my credit score?
The rental market is extremely dynamic and competitive. In most cases, there are dozens of people (all with different backgrounds, incomes and rental histories) vying for an apartment. Especially in bigger cities, you might be competing with hundreds of others for this one single apartment.
In order for the property manager or landlord to choose the most suitable candidate, they check for income and credit score, and look for any red flags. What they're checking for is the likelihood that this renter will be able to pay the rent, and if they have ever not paid the rent in recent years.
It's not just the three digits showing your credit score. The landlord will also want to know what your income is, your employment situation, among other things. Generally, you will be expected to earn three to four times the monthly rent. For most landlords, a credit score over 600 is sufficient enough to pass their checks.
Some property managers would also use additional screening services, which will look at your criminal records, bankruptcies, payment history, etc. Last, but definitely not least, it has become extremely popular for property managers to also check your social media accounts, so they might request you to provide them with your handle name (though this is happening less over time).
At Alcove, our landlords require applicants to pass these: No criminal or eviction record, credit 575+, no more than $2000 past due or in collections, and income 3x rent (bedroom rent). We also accept guarantors to remedy limited credit or income.
Once again, it is very difficult to determine what is a good and bad credit score, as it all depends on the home or apartment you are renting, as well as your income.
If the property manager, however, determines that your credit score is not sufficient, there are still ways that you can rent an apartment. Getting a guarantor would be your first and best bet.
If there is someone to cosign with you and guarantee the rent for you in case of emergency, you have a much higher chance to score that dream home or rental apartment. Before choosing your guarantor, make sure their credit is considered "great" because they'll be legally obligated to pay your rent in case you cannot.
Another thing that is very likely in the case of bad credit score is that you might be asked to pay a higher deposit or if you have savings pay the first few months in advance.
Resident Score uses the same traditional 350–850 credit score scale you’re accustomed to seeing, but it's built with actual rental outcome data from the industry, and typically identifies the characteristics of apartment residents like the likelihood of evictions.
We hope that you now know much more about your credit score and why is it used for renting! Your dream home is another step closer!
If you'd like to learn more about renting, check out these articles: