When renting your first place, good credit can open doors
When first-time renter Angelica Fattu-Logan, 20, started applying for apartments, she braced for rejection. But those rejections never came – in part because she had good credit.
“I applied to about three or four different apartments, and they all accepted me right away,” says Fattu-Logan, a drugstore manager and college student from Peoria, Arizona, who recently moved into an apartment with her fiancee. “It was a pretty quick process, like two days. It was just a matter of picking which one I liked better.” She maintains her credit by paying for groceries with her credit card and paying off the balance right away.
For young folks fearing rejection from landlords, Fattu-Logan’s positive experience is heartening. It also illustrates an important point: Good credit can be especially helpful for first-time renters.
BETTER CHANCES OF APPROVAL
When you’re new to renting, good credit can make up for other shortcomings in an application.
“If (applicants) have a good credit score, even if they haven’t rented before, that means that they’ve handled their finances well and that they’re responsible,” says Laura Agadoni, a landlord and real estate writer based in Marietta, Georgia. That could be enough to make up for a lack of a rental history, otherwise a major factor in rental decisions, she says.
“My bottom line is, I just want to get my rent on time,” she says.
Requirements can vary, but Agadoni says many landlords look for credit scores of 640 or higher for renters. They also consider factors such as income, debt and employment.
In some cases, those with good credit scores might not need to find a co-signer, a person – often a parent – who’s equally responsible for making payments. But Agadoni notes that she might still require a first-time renter with good credit to get a co-signer if they’ve worked at their job for less than a year and have limited savings, for example.
“Every situation is different,” she says.
SAVINGS ON RENT AND DEPOSITS
If you’re approved with good credit and meet all the landlord’s requirements, you’ll generally just have to pay the security deposit and rent described in the rental listing. But if you’re approved with bad credit, you may have to pay a premium – not just on rent, but potentially for utilities, too.
“We’ve definitely seen consumers with more challenged credit having to put higher deposits down in order to rent a property,” says Jim Triggs, senior vice president of counseling at Money Management International, a nonprofit credit counseling agency. The firm offers counseling to renters, among other services. He adds that landlords sometimes also charge higher rents to these applicants.
Many utility companies – such as electricity and gas providers – also charge upfront deposits to those with poor credit.
“Normally, the better your credit, the better arrangements you’ll have with any of those utility companies, up to and including zero deposits,” Triggs says.
MORE BARGAINING POWER
In cities where the rental market is extremely competitive – say, San Francisco or New York – having good credit is just table stakes. But in areas where landlords have trouble finding tenants, a good score can give you bargaining power.
That’s because good credit is a crystal ball that tells landlords you’re reliable. “How you pay your bills is predictive of how you’re going to pay your bills in the future,” says credit expert John Ulzheimer. “That includes rent.”
If a landlord is eager to find a renter and you have good credit, “the apartment (landlord) is absolutely going to want you to move in, and move in lickety-split, because they’re going to want to start getting paid,” Ulzheimer says. “And you can lean on them a little bit.”
For example, he says, you may be able to negotiate a good parking spot or extra garage remote controls, even as a first-time renter.
BEFORE RENTING, CHECK YOUR CREDIT
Before you go apartment-hunting, check your credit reports and credit scores to see where you stand.
Doing so is free and doesn’t hurt your scores. If you have good credit, you can walk into property viewings with confidence, knowing you’re set up for success. If you have bad or no credit, you can focus on making improvements. Be upfront with landlords about what steps you’re taking to work on your credit and, in the meantime, budget for a larger security deposit. It may take longer to find a space that’s right for you, but with persistence – and maybe some help from a co-signer – you’ll get there.
This article originally appeared on the personal finance website NerdWallet. Claire Tsosie is a writer at NerdWallet. Email: email@example.com. Twitter: @ideclaire7.
NerdWallet: How to Read Your Credit Reports
Federal Trade Commission: Utility Services