Renting with Poor Credit: What You Need to Know

As the cost of housing rises so does the number of renters. Buying a home just isn’t as feasible as it once was, especially for the Millennial Generation. However, maintaining a good credit score can also be challenging for many people, and given that many landlords and property rental companies require a credit check before agreeing to lease a unit to a tenant, this presents an unfortunate obstacle for folks who are looking for a new place to rent while establishing or rebuilding their credit scores.

If you fall into this category, then you’re not automatically disqualified from renting. Instead, you’ll just have to look for alternative renting options.

Renting with Poor Credit

It’s not impossible renting with poor credit. Renting a house with poor credit is possible. You can find a rental while establishing or improving your credit score. Here are a few tips renting with poor credit to help get you started.

Demonstrate Sufficient Income & Assets

Poor credit doesn’t always correlate with low income and zero assets. While your credit history might have some poor marks from missed payments, too many new credit lines opened in a short period of time, or coming too close to your credit limit, you could still demonstrate that your income and/or assets outweigh your low credit score.

This might mean you’ll have to put down an extra payment (e.g., first and last month’s rent upfront) or a larger security deposit. But, if you have the funds available, then it could be a useful way to get around the minimum credit score “requirements” set by the property owner.

Rent from Individual Property Owners

If you’re like the majority of individuals with not-so-great credit scores, then perhaps you don’t have the secret weapon of a huge income or stockpile of valuable assets to back up your financial viability as a tenant. There’s nothing wrong with this scenario – it will just require more creativity on your part.

While most property companies and large apartment or condo complexes require credit checks before leasing out their units, individual property owners tend to be more flexible when it comes to their requirements for potential tenants. Go on Craigslist or a local housing Facebook group to find small-time property owners who typically rent for a passive side income because they’ll be more likely to cooperate with your unique situation than a by-the-rulebook property management company.

Get Recommendations 

Not having much luck with individual property owners? Another option to try would be getting recommendations from others who have worked with you on a financial basis. Similar to job references, you wouldn’t include a recommendation from a friend or a spouse.

Instead, get recommendations from former landlords (assuming you paid your rent in full and on time), contacts you have with your bank or credit union (who can vouch for the timeliness of your payments) or employer. These recommendations could establish authoritative trust (“Don’t just take my word for it!”) and demonstrate to a potential landlord that, despite your credit score, you would be an excellent tenant during your time living at the property.

Bring a Co-Signer Along

If you don’t have a significant income or amount of assets to your name, then you could overcome a poor credit score on a rental application by adding a co-signer to your file. Some properties do not allow co-signers, while other landlords actively encourage it to ensure their tenants’ financial liability is reduced as much as possible.

A co-signer with a great credit score and solid, proven income could help you secure the home of your dream. But, be sure not to miss any payments or upset your property manager so your co-signer never regrets their decision to help you by adding their name to your rental contract.

Month-to-Month Leasing

If the aforementioned options aren’t working out for you, then month-to-month leasing is another potential idea for overcoming a poor credit score during the housing hunt. This can be a riskier option for you compared to the others discussed above because month-to-month leasing typically means that you agree to leave whenever the landlord asks you to move (sometimes with a grace period to give you time to prepare – you can also choose to leave any month you want to), or the landlord might increase your rent unexpectedly one month (as opposed to a 12-month lease with a fixed monthly rate).

Month-to-month rentals are often more lenient when it comes to credit score calculations because the risk is shifted away from the landlord to the tenant, so be sure to read the fine print before agreeing to anything in a month-to-month lease contract. 

It’s not impossible renting with poor credit. Renting a house with poor credit is possible. You can find a rental while establishing or improving your credit score. It may require more extensive home hunting, phone calls, requests, etc. But, ultimately you can secure a home until you’re able to improve your credit score beyond the minimum threshold or save up enough money to put a down payment on your own home.