How to Clean Up Your Credit Before Renting

Thinking of renting? In most cases, a credit check is one of those things that the landlord will want to do before your application can be approved. 

  Poor credit is one of those frustrating things that can prevent your rental application from being approved. Does that mean you can’t rent if you don’t have good credit? Not at all! There are some exceptions and things that you can do to help your application stand out, even if your credit isn’t that great. 

 
 Read on for some facts about credit checks, as well as some tips for cleaning up your credit before renting. Finally, see what you can do if you find yourself trying to rent with a low credit score. 

What Do Landlords Check for When They Run a Credit Check? 

When landlords run a credit check, their main concern is to verify that you are who you say you are. They’ll also be checking to see how well you pay your bills, the same as any creditor would do. 

In addition to pulling your credit score, landlords may also look at your credit report for any evictions, bankruptcies, loan defaults, or accounts in collections. They might also look for late payments. In addition to credit checks, landlords will usually run other checks too, including background checks. Often, they will do a criminal background check, verify your employment history, and contact references as well. The main goal of all of this is to verify your identity and to check to see if you are in a good position to pay the rent each month. They’ll also want to speak with your previous landlords as well. 

What Is the Minimum Credit Score Required to Rent a Home? 

There is none. It all depends on the landlord’s criteria. Most landlords will look for a minimum credit score of about 650. Anything less than that is generally considered poor credit. 

How to Read Your Credit Report 

The first step to fixing your credit is knowing where you’re at.    

Here are the FICO credit score ranges: 

Factors That May Affect Your Credit Score 

• Payment History: If you have been late on credit card payments or loan repayments, this could have a significant impact on your credit score. Even worse, late payments can be reflected on your records for up to seven years. 
  
  
• Balances: Maxing out your credit cards can negatively impact your credit. The amount of credit you’ve used versus the credit card limit should be 30% or lower. For example, if your total combined limit of all your credit cards is $10,000, your debts across those cards should be $3,000 or less.   If you have high balances, consider paying extra to help improve your credit score. 
  
  
• The Length of Your Credit History: More extended credit history is likely to give you a higher score, but of course, you must have good payment records. 
  
  
• Number of Inquiries: Inquiries on your credit report can either be hard pulls or soft pulls. 
  • Hard pulls impact your credit report negatively. They occur every time you apply for a new line of credit. Each pull causes your credit score to drop, and the inquiry stays on your record. 
  •  A one-time pull has a negligible effect, but if it happens frequently, it will raise a red flag to potential creditors or landlords. They will wonder why your credit has so many inquiries. 
  •  Soft pulls do not appear on your history and don’t affect your credit score. They include credit increases, credit card preapprovals, and background checks for jobs or mortgages. 
    
    
•  Types of Credits: The average American has about seven credit accounts. You can still have a great score with only one credit card, but additional accounts can help to improve your score further. 

Steps to Clean Up Your Credit Before Renting a Home

Now that you know what a credit check entails and the factors that affect it, here is how you can clean up your credit:   

1. Check Your Credit Report

Every U.S. citizen is entitled to a free copy of their credit report from the three main credit bureaus, Equifax, TransUnion, or Experian. Ensure you get a copy of your credit report from the three bureaus because you never know which one the landlord will use. Each report can look slightly different from the others. 

You can order all three reports at once if you want to get acquitted with your credit history for the first time. You can also order one at a time, spread across the year, to help you monitor your credit report every few months.  

2. Review the Report

Carefully read each report to ensure the information is correct. Compare the reports with your financial records to ensure they’re in line. 

Identify errors and discrepancies, including typos, missing accounts, or outdated reports. According to the Federal Trade Commission, one in five consumers encountered an error in one of their credit reports. Such errors are common and can lower your credit score. 

Remember to look at your loan statuses, payment histories, account balances, credit inquiries, and limits. For example, a previous creditor could have marked a particular payment as late, even if you paid on time. Flag the error for later dispute. 

Also, check your personal information, such as your date of birth, name, and address. Although this information will not affect your credit score, any error could signal identity theft. Check all the accounts opened under your social security number to ensure they are all yours. 

Note down every error plus the correct information. Attach all the relevant documents to support your claims. 

3. Dispute Each Error

File your disputes online or by letter via mail. You will need to file each dispute separately with the concerned bureau. You should also send the concerned creditor a dispute letter containing the correct information. Ensure that you attach enough evidence to win the dispute.  

4. Record All the Correspondence

You will also want to keep a record of all claims made to each credit-reporting agency. When you make calls, note down the names of the representatives who speak with you, the date, time, and what you talked about. This information comes in handy as proof when a creditor or bureau tries to fight your claim.  

Continually follow up on your claim until it is resolved. Credit reporting bureaus can take up to 30 days to investigate a claim. They should also provide you with all the relevant information regarding the disputed account. Any correction made should reflect on all three credit bureaus as they communicate amongst themselves electronically.  

5. Add a Personal Statement

You may also want to add a personal note to your credit report. For example, if you have late credit card payments, you can mention the circumstances surrounding it; maybe you lost your job or had an illness.  

This statement should be about 100 words. Although it will not necessarily increase your actual credit score, it could impact your case positively as you work towards cleaning your credit report. 

6. Catch Up on Delayed Payments

Work on your accounts in collections and delinquent accounts. Late payments or high balances on credit cards can lower your credit score.    

7. Pay Off Huge Credit Card Debts

Credit card issuers report account balances once a month. Work towards reducing your debts, as this will reflect on your credit. Also, try to reduce your credit utilization rate to between 10% and 30%.   

Try to avoid closing any credit cards, as this can impact your credit utilization, which in turn can impact your score.   

8. Consider Hiring a Credit Clean-Up Company

There are credit repair companies that can help to clean up your credit. Still, as Experian states, keep in mind that there’s nothing that a credit repair company can do for you, that you couldn’t do yourself. But if you’re short on time and want to clean up your credit, this may be a good route to take.   

9. Combine Your Report With Responsible Behavior

It is unlikely you can delete every debt collection on your record or win every dispute. But consistent good credit behavior will make a significant difference on your credit report over time. Establish wise financial habits such as channeling more funds towards clearing high-interest debts, try to keep cards open so that your credit utilization rate stays within 10-30% of your limits, and opening a secured credit card. Also, limit your credit use to only products you need and can afford.   

10. Monitor Your Credit Regularly

Keep track of the changes that result from the credit report cleanup. Doing so will help you work more efficiently with creditors and lenders moving forward. Monitor your credit at least once a month via your bank or credit card service. Be sure to get copies of your credit reports from the three credit-reporting bureaus every year. If you note any error, take prompt action. 

Looking for more tips on grabbing that dream rental of yours? Have a look at this article. 

Easy Steps to Improve Your Credit Score 

Improving your credit can take time. The key is to stay consistent and positive. Raising your credit score will give you an edge when renting a house. Here are some things that you can do to help improve your credit score: 

  Always Pay Your Bills on Time 

According to Experian, your payment history accounts for 35% of your FICO credit score, making it one of the most important factors that can impact your score. Frequent late payments will decrease the score, and even just one missed payment can have an impact. 

Consider Your Credit Utilization 

Experian states that the second most important factor is your credit utilization. This is calculated by dividing the total of your credit card balances by your total credit limits. The lower this number, the better as far as your credit score goes, so make sure you’re paying off your credit card balances. Also, try to avoid maxing out any credit cards that you have. 

Open a Secured Credit Card 

If your score is very low, consider opening a secured card. As long as you make on-time payments, a secured credit card can help you build your financial score again. Secured cards use cash as collateral so ensure you have enough cash upfront.   

Get Someone to Include You as an Authorized User on Their Credit Card 

Request your spouse, family member, or close friend to add you to their credit card as an authorized user. If they have good credit, you will also share in their reputation. Make sure this person is responsible for their credit because their credit report will automatically affect yours. 

Renting With Bad Credit? Here’s What You Need to Know 

Having a low credit score can make it tricky to find a rental, but that does not mean it’s impossible. Here are some steps that you can take to prove to a landlord that you are a responsible and reliable tenant. 

• Find a Guarantor or Cosigner 

One of the best things that you can do if you have a low credit score, is to find a guarantor or cosigner who meets the income requirements and has a good credit score. The guarantor will sign the lease with you and will be legally liable to pay your rent if you fail or are unable to. The landlord will get an assurance that rent will always be paid on time, regardless.  

• Get Strong References 

If you were a great tenant in your prior rentals and had a positive record with your landlords, request that they give you a reference. There’s always a possibility that a prospective landlord will love the recommendations and overlook the bad credit. 

• Demonstrate That You Can Afford the Rent 

A landlord’s primary concern is your ability to pay rent. They might have a mortgage on the property and need a reliable renter. Showing proof of income over the past two years, that’s three times the amount of asking rent, can help to demostrate your ability to pay the rent. You could also consider offering to pay several months of rent upfront as well. 

• Rent a Room From a Local Homeowner 

A local owner is less likely to run credit checks to approve you. You also have a chance to make a good impression when you meet them in person. You can also ask friends and family for suggestions as well. This is especially ideal if it’s your first time renting and you don’t have established credit or rental history. 

• Settle for Less 

If you have poor credit, you may want to consider avoiding the highly competitive areas. You might consider renting a smaller apartment or a place with fewer amenities at first. Be willing to make a sacrifice as you work towards cleaning up your credit. You will be surprised at how much you can save. 

• Find a Roommate 

Another great option is to find a roommate. Look for someone who is already in a rental and in need of a roommate. Alternatively, you can look for someone with good credit who is willing to split rent expenses with a roommate. Provided you have a roommate agreement, this arrangement can be a great option for the right people. 

Wondering what else you might need to consider when renting? Have a look at our article: 20 things you’ll need when renting! 

Good credit gives you an upper hand when looking for a house to rent. Landlords and property managers put a lot of emphasis on tenants’ credit reports. They want to make sure that you can pay rent on time and that you have a strong history of on-time payments.   

While it can take time to build a strong credit history, you can indeed take steps to clean up your credit. Check your credit reports, sort out any errors or discrepancies, ensure that you make on-time payments every single time, and make sure you pay attention to your credit utilization rate. These are all things that can help to improve your credit score and make your application attractive to potential landlords.  

Looking for a new place to rent? Check out the available rental homes to see a list of houses for rent in your area today.