Do You Need Credit To Rent an Apartment?

Fact checked by Vikki VelasquezReviewed by Katie MillerFact checked by Vikki VelasquezReviewed by Katie Miller

While you do not necessarily need a high credit score (or a credit score at all) to rent an apartment, building your credit early in life can strengthen your rental applications and make you more appealing to landlords. Plus, good credit can help you reach many other life goals, from buying your first car to taking out a mortgage on your first home. 

Read on about the role credit plays in the rental process and how you can start to take your first steps toward a solid financial future.

Key Takeaways

• Landlords consider various factors when evaluating rental applications, including credit history.
• It is possible to rent an apartment without a credit score by showing steady income, getting a guarantor or co-signer, demonstrating a savings balance, and providing strong professional references. 
• Renters with low credit often have to show pay stubs or bank statements or pay a higher security deposit and a greater portion of rent in advance. 
• You can build your credit by managing your credit cards, loans, collections accounts, and non-financial factors. 
• Strong credit can support your rental application and many other decisions, from buying a new car to getting approved for a large loan.

Factors Considered by Landlords

Rental applications commonly ask for official documentation of your employer, income, personal identification, criminal history, and past residences. Many landlords will also ask you to pay a small fee for a credit check so they can verify the stability of your personal finances.

If you have a poor credit history, you will likely need to use other methods to prove to your landlord that you can pay your rent. You may have to show pay stubs or bank statements or pay a higher security deposit and a greater portion of your rent in advance.

Under the Equal Credit Opportunity Act, landlords must tell you if they reject your rental application because of your credit or background. Landlords must also tell you if they will charge you more due to your personal history.

Note

The Equal Credit Opportunity Act also protects you from identity-based discrimination regarding race, color, religion, national origin, sex, marital status, or age (provided that you are old enough to enter into a contract).

Minimum Credit Score Requirements

Landlords may suggest minimum credit score requirements, though these scores vary. For example, a study from Rent Cafe found that the average credit score of renters in the U.S. was 638 in 2020 (the most recent data available), but scores varied greatly based on the renter location and type of residence. Respondents had scores as low as 551 and up to 715, on average.

It’s also not uncommon for younger adults, who have short credit histories, to also have lower scores. Experian reports adults ages 18-24 having an average credit score of 630, in line with what actual renters report having qualified with around the U.S.

Note

Credit scores are often called FICO scores, after the Fair Isaac Corporation, an analytics company that invented the 300-850 system for scoring credit that is most commonly used in the U.S. today.

Most importantly, if you are concerned about your credit score, talk to your landlord to ensure your application won’t be disadvantaged.

How To Rent an Apartment With No Credit

While it is generally much easier to rent an apartment with a credit score, there are ways to rent without credit. 

In some ways, your credit score is like a grade—an SAT or ACT score for your financial stability. Not taking the SAT doesn’t mean that you lack academic skills. Moreover, a poor ACT score doesn’t mean you are a poor student. Rather, the score is a quick rule of thumb for college admissions officers to quickly understand a bit about your academic background. The same applies to landlords who are trying to understand your financial stability. 

In the case of apartment rental applications, you will need to demonstrate your financial stability somehow. Here are some ways to prove it.

Provide a Savings Balance

Savings are a crucial element of financial health that is not included in credit scores. Using a bank statement to prove your savings balance can demonstrate financial capability to many landlords.

Demonstrate a Steady Income

Official documentation of steady income or employment, such as tax returns, bank statements, pay stubs, or a letter from your employer, can help you demonstrate financial stability to landlords.

Get a Co-Signer

For apartment rentals, a co-signer is someone—usually a friend, family member, or roommate—who will financially help the applicant pay their rent. When adding a co-signer to your lease, your credit and their credit are both considered in the rent application, so finding a financially healthy co-signer can greatly benefit people with low or no credit. Notably, co-signers share rights to the rented apartment.

Find a Guarantor

In apartment rentals, a guarantor is a person who will put down their personal and financial information to support a renter’s application. Unlike a co-signer, the guarantor is not listed on the apartment title, and they are only responsible for making up payments if the renter cannot pay or prematurely breaks the lease agreement.

Warning

Landlords often require first-time apartment renters to have guarantors, which is especially relevant to young adults renting for the first time.

Provide References

Providing professional reference letters from former lenders, former landlords, or employers can affirm your character and support your rental application.

4 Ways To Build Your Credit

With the importance of credit in apartment rentals, it’s lucky that building credit is not a difficult task. Here are some ways to help you do it: 

Manage Credit Cards

Opening a credit card would be the first step. After that, paying your credit card balances on time and in full will help you increase your credit score, as these actions are automatically reported to the credit bureaus. Applying for higher credit limits can also help you build your credit, as spending less of your credit limit will increase your credit score.

Obtaining a low-limit credit card or becoming an authorized user on another person’s credit card are two options for people with low credit or no credit. As the name states, low-limit credit cards have low limits and typically less stringent approval guidelines. An authorized user can use another person’s credit card, and their credit score can benefit from the good credit practices of the credit card owner.

Take Control of Loans

Keeping up with any loan payment plans will increase your credit. Plus, taking out small personal loans may help you quickly increase your credit. For people with lower credit scores, peer-to-peer lending companies may provide loans that larger banks would not be able to.

Pay Collection Account Balances

Collection account balances are factored into your credit score, so paying off any outstanding balances from late credit card payments or other missed bills can boost your credit easily.

Make the Most of Non-Financial Factors  

Aside from financial products, there are many ways to boost your credit. If you or your landlord report your rental payments to a credit bureau, you can boost your credit score. You should also check if your store credit accounts or utility companies report payments to a credit bureau, as those transactions can also impact your credit score.

Importance of Credit in Other Aspects of Living

Credit is relevant to various aspects of life, including buying a car, applying for loans, and setting up utilities. 

Credit is not something to fear as a barrier to renting your first apartment or buying the car of your dreams. Rather, it’s a helpful tool that you can use to demonstrate your reliability and gain the trust of landlords and banks alike, so you don’t have to pay higher fees or find a co-signer.

Can You Rent an Apartment Without a Credit Score?

Credit history is often an important factor in rental applications, and most landlords require a credit check for renters. You technically can still rent an apartment without a credit score, but your application may not be competitive with other applicants. Plus, the landlord may ask you to pay more of your rent upfront or increase your security deposit.

If you plan to rent an apartment but don’t have a credit score, you may want to consider finding a guarantor or co-signer, providing a savings balance, demonstrating a steady income, or offering professional references to support your application. 

How Can You Build Credit Specifically for the Purpose of Renting an Apartment?

If you want to build credit specifically to rent an apartment, you will want to increase your credit score quickly and efficiently. Your priority should be to stay current on your credit card and loan payments.

If you have a balance in your collections account, you should make sure to pay that off as soon as you can. If you have trouble getting credit card applications approved, you may want to consider obtaining a low-limit credit card or becoming an authorized user on another person’s credit card. If you have trouble getting personal loans approved, you may want to consider borrowing from a peer-to-peer lending company, which may have less stringent approval requirements.

What Is the Typical Minimum Credit Score Requirement for Renting an Apartment?

The average credit score of U.S. renters is 638, but note that requirements from individual landlords or rental companies will vary based on region and building type. This is in line with the average credit score of 18- to-26-year-olds, too.

Notably, under the Equal Credit Opportunity Act, Landlords must tell you if they reject your rental application because of your credit or background. If you continually get rejected for your credit score, you may want to consider methods for increasing your credit score.

The Bottom Line

Credit scores help landlords understand your financial history and how likely you are to be a tenant who pays on time. While landlords do not often require a specific credit score minimum, renting an apartment with a low or nonexistent credit score can be very difficult. A landlord may ask you to pay more rent upfront or present proof of steady income. 

If you have a poor credit score and plan to rent an apartment, you may consider finding a guarantor or co-signer, providing a savings balance, demonstrating a steady income, or offering professional references to support your application. Alternatively, you can raise your credit score now by managing credit cards, taking control of loans, or paying account balances. Building your credit today can help future-you rent an apartment, buy a car, borrow large loans, and hit many more of life’s milestones.

Read the original article on Investopedia.