If you’re in the middle of apartment hunting, are you doing so with a black cloud over your head? You are dreading your potential landlord asking for a credit report because you know it could negatively affect his decision to accept your application. What is the relationship between your credit score and your rent? What impact will a bad credit score have on your rent? Will you be able to improve your credit score by paying your rent on time? You’ll be much better off fully understanding your credit score and the rental process before going apartment hunting.
Your Credit Score’s Impact On Rent
“We’ll need you to authorize a background and credit check” are words you’ll often hear while apartment hunting. The good news is that it’s still possible to obtain a lease if you have no credit history or a poor credit score, although it’s going to take a little work.
Your property manager will obtain a credit report to see if they can trust you or not. It’s costly to them if they allow tenants into their units that are not responsible and will not pay the rent on time. Your credit score is the property manager’s first glimpse into whether they can trust you to make timely payments or not. So, to put it bluntly, a poor credit score will impact your potential to secure a lease or pay rent. Landlords may place restrictions on your application or outright deny it.
If you need to rent a unit, there are a few options at your disposal. Your options include
Finding a co-signer
Rooming with someone who has a great credit score that can offset your poor score
Providing your own stipulations without being asked to do so, such as offering a larger deposit
Your Rent’s Impact On Your Credit Score
The good news is that if you secure a lease, you may be able to quickly build your credit by paying your rent on time. Depending on which agency you use to obtain your credit score, your on-time rental payments may be calculated into your credit score. For example, Experian will include rental payment information as part of your standard credit report if your payment data is reported to the Experian RentBureau.
This too will take some work on your part, however. According to Experian, “Experian RentBurea receives updated rental payment data every 24 hours from property management companies and electronic rent payment services nationwide.” This means that if your rental payments are not being included on your credit report, you may have to ask your landlord to submit them. If your landlord will not report the data, you can sign up for a rent payment service that has a relationship with Experian RentBureau.
According to a FICO spokesperson, less than 1% of credit files contain information regarding on-time rental payments. If you are looking for a way to boost your credit score, make sure your on-time rental payments are being reported. In addition to Experian, Equifax and TransUnion also include rent information, if provided.