You may think you need a specific minimum credit score to rent an apartment or house, but in reality, the necessary score can vary by landlord, tenant, location and a variety of other factors.
This post covers what constitutes a good credit score, what goes into credit score calculations and what other information landlords may consider. We will also discuss what to do if a property owner denies your rental application and how to go about improving your credit for future applications.
The minimum credit score required to rent a house may vary depending on several factors, including the landlord, the current real estate and rental markets, your income and the city or neighborhood in which you plan to live.
If your credit score is in the mid-600s or below, property owners may take a closer look at your credit details. Renters with low credit scores, such as under 600, may have more trouble qualifying for a rental house or apartment. If you do receive approval, you might have to put down a higher security deposit when you sign the lease.
To have a credit score calculated in the first place, you must meet a few minimum requirements. A valid FICO® Score requires the following information:
Around 90% of top lenders use FICO® Scores, making it the most widely utilized credit scoring model. According to MyFICO®, a good credit score falls in the range of 670 to 739.
|Rating||Credit score range||How the credit score is seen by lenders|
|Poor||580 or lower||Because these scores are well below the U.S average, they may reflect that the borrower is a higher risk.|
|Fair||580–669||Although slightly below the U.S average, lenders may approve loans in this range.|
|Good||670–729||Being near or slightly above the U.S average, the majority of lenders consider this a good score.|
|Very Good||740–799||Above the U.S average, scores in this range demonstrate that the borrower is likely to pay back what is owed.|
|Exceptional||800+||Well above the U.S average, lenders consider borrowers in this range to be very low risk.|
While many lenders use the FICO® scoring model to help make decisions, each landlord or property management company has its own way of determining the likelihood that potential renters will pay according to the terms of the lease. For that reason, no universal cutoff or average credit score exists to qualify for a rental unit.
In addition to your credit score, landlords can look at a number of factors in determining whether to approve your rental application.
Potential landlords want assurance that you will be a good tenant who pays the monthly rent in full and on time. They will check your payment history for a solid record of on-time payments. Payment history counts as the most important factor in your FICO® Score, making up 35% of your score.
Landlords may review your existing debts to make sure you can afford the monthly rental payments in addition to your other obligations. If you have too many credit cards, loans, such as student loans, or unpaid taxes, potential landlords may see these as red flags. You may want to evaluate how much total debt you carry since “amounts owed” makes up 30% of your FICO® score.
Landlords often review bankruptcies to see if the canceled debts came from prior rental properties. Keep in mind that bankruptcies can stay on your credit report for 7 years for Chapter 13 and 10 years for Chapter 7. If you have a discharged bankruptcy, however, landlords will likely see this as a lower risk than someone currently going through bankruptcy. The impact of a bankruptcy lessens as time goes on.
Landlords and property management companies may use a specialized tenant screening report to help them evaluate potential renters. Although the information used varies by service, it may include credit reports, rental history (including eviction lawsuits), and a risk score based on criteria selected by the landlord.
Landlords may consider the following factors in addition to your credit score:
By reviewing your credit report, you can check it for inaccuracies and see how you look on paper to potential landlords. Compare what’s listed on your credit report to the specific rental requirements before you fill out a rental application. That way, if a landlord has requirements, such as you needing to have no bankruptcies listed on your credit report, you can be sure your report meets the criteria before you apply and have them run your credit with a hard inquiry.
You can receive a free report once a year from the major credit reporting agencies by visiting AnnualCreditReport.com. You can also check your credit report at any time for a fee by contacting any of the three major credit bureaus (Experian, Equifax and TransUnion). These companies cannot legally charge you more than $13.50 for each report.
By law, landlords must provide an “adverse action” notification to the prospective tenant explaining why they rejected the application. If you receive a denial, the following steps may help you get future applications on track.
If you didn’t look over a copy of your credit report before submitting your rental application — or even if you did — now would be a great time for you to check it out and catch any errors or review the negative information that the landlord may have seen. If you haven’t already received your free yearly report, you can do so at AnnualCreditReport.com or through Experian, Equifax and TransUnion directly for a fee. If you find a mistake on your credit report, you may want to contact the potential landlord to explain the situation and see if they will reconsider their decision.
As a tenant or rental applicant, the Fair Credit Reporting Act (FCRA) gives you rights when your rental application is denied in what is called an “adverse action.” Among your rights, the landlord must supply you with the contact information (name, address and phone number) of the screening company and give you notice that you have 60 days to request a free copy of your tenant screening report. Review the report for any incorrect or outdated information. If it contains an error, you can dispute it.
By law, you have the right to dispute any inaccurate information on your screening report and have it corrected. The credit reporting company generally has 30 to 45 days to investigate your dispute, but it may vary by state. The Consumer Financial Protection Bureau also provides dispute forms for you to use.
If a landlord rejected your rental application, you may decide to look for a different rental property that fits your budget and credit score range. Start by calculating your rent to income ratio to get an idea of what you can afford. You may also want to contact the prospective landlord before you apply to confirm their minimum requirements.
If the property owner denied your application due to poor credit, consider working to build a better credit score. Although you can’t obtain a higher credit score overnight, with some patience, the following steps may help you gradually lift your credit score:
If you have a lower credit score, the following strategies may help improve your chances of renting a house or apartment.
Rent payments generally do not appear on your credit report unless you use a third-party rent-reporting service such as LevelCredit or Experian Boost®. If you have several months of unpaid rental debt, however, your landlord may have sent it to collections, which means the collections account may end up on your credit report.
Having outstanding debts — rental or other kinds — sent to collections can negatively impact your credit score and may remain on your credit report for up to seven years. You generally won’t see evictions on credit reports, but they can stay on your public records for up to seven years.
If you believe better credit will help you rent a home — you can take steps to rebuild your credit or start building a credit score. If you don’t know where to start, Self offers tools that can help you build credit, build savings and arm you with information that help you understand how to handle your credit decisions.
Disclaimer: FICO is a registered trademark of Fair Issac Corporation in the United States and other countries.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.
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