Nobody likes failing a test. Especially when that test determines whether or not you'll be getting the thumbs up on the apartment you're pining for. The credit check when vying for a place is an important determining factor for a landlord or management company as they consider potential tenants – and it makes sense, your landlord is looking for someone reliable who's going to pay his or her rent on time, isn't drowning in their own financial commitments, and won't be burning the building down. So what will your landlord see and how will he or she use that information?
What information is a landlord looking for in a credit check?
By looking at your credit report, your landlord is interested in finding out how stable and consistent your financial record is. They'll look at whether you've paid your credit card bills and other accounts on time over the years, how many accounts you've opened and closed, how much debt you're paying off in comparison to how much income you make (which may affect your ability to afford a monthly rent), whether or not you've filed for bankruptcy in the past (or have an ongoing bankruptcy action), and to see if there are any foreclosures on your record that might indicate you still have a balance to pay off.
A credit score analyzes these factors and is meant to help lenders estimate how likely someone is to fulfill financial commitments like bill pay and it can range anywhere from 300 to 850, though each landlord is different and there's no magic number that means you're automatically approved — or rejected — as other pieces of information also come into play.
How important is the credit check?
"A renter's credit is the most important part of the application approval," Maurice Ortiz of Chicago's Apartment People says. But it's not the only part. Landlords also consider your renting history by contacting former or current landlords who can tell them whether you paid rent on time, damaged property, or garnered frequent complaints from neighboring units with your nightly karaoke rendition of Alanis Morissette's "You Oughta Know".
Stable employment and income matters too. If the rent exceeds 30 percent of your gross monthly income, for instance, that's bad news for you as a tenant candidate.
"Keep in mind that every landlord if different and some may rely more on rental history than credit," Ortiz says.
What options do you have with bad credit?
First off, make sure you actually have bad credit before you go spiraling into despair at the prospect of homelessness (or just the postponement of a luxury lifestyle). Ortiz recommends getting your own credit check ahead of time. It's often not as bad as you think. Plus, "It's free and easy," he says.
But if you do that and it turns out your score really is far from sterling, you do still have a few options. The internet or brokers may be able to guide you in locating which landlords tend to view bad credit as a dealbreaker and which ones tend to be more flexible. As is often the case in rental negotiations, smaller buildings or independent landlords typically have a little more wiggle room than mega management companies that adhere to sweeping policies.
If you've got a clean record in terms of rental and employment history, some landlords may be more willing to overlook a few blemishes credit-wise, but again, it varies case to case. Other options include paying an additional security deposit or bringing on a co-signer to back you up. Good luck out there.
·Curbed University [Curbed Chicago]