Understanding the Impact of Credit Scores on Rental Applications (2024)

Landlords or property managers run various checks on prospective renters during the tenant screening process. Aside from speaking to references and performing background checks, analyzing a tenant’s credit report is important. After all, a credit check can reveal a prospective tenant’s likelihood to pay rent on time each month. However, a good credit score doesn’t necessarily guarantee you’ll be approved for a rental. Today, we’ll go over the impact of credit scores on rental applications and how you can rent with a lower credit score. Check out the video below!

Contents of This Article:

• Does Your Credit Score Matter for a Rental Application?
• What Is the Impact of Credit Scores on Renting?
• What Credit Score Do You Need to Rent?
• Options for Renting With a Low Credit Score
• Find Reliable Tenants With Property Management

Does Your Credit Score Matter for a Rental Application?

As we mentioned in the video, a thorough tenant screening process can help you find reliable tenants for your rental properties. While many landlords and property managers in Philadelphiarun credit checks on prospective tenants, they’re not necessarily zeroing in on the score.

In fact, some landlords might not care about your credit score at all. Instead, they’ll look for other factors within a credit report, like your payment history, to determine the likelihood that you’ll pay rent on time.

For instance, some of the things landlords or property managers may look for on a credit report include the following.

1. Payment History- Landlords often pay close attention to an applicant’s payment history. For instance, they’ll look for patterns of on-time payments, late payments, or delinquencies on credit cards, loans, or other lines of credit. Consistent on-time payments can demonstrate financial responsibility and reliability.
2. Rental History- Some credit bureaus may include rental history on their reports, which can help landlords predict whether tenants will pay on time each month.
3. Collection Accounts- Landlords may look for red flags like collection accounts or charge-offs on a credit report. These negative marks may suggest that the applicant has failed to pay off debts and may indicate a higher risk of late rent payments.

What Is the Impact of Credit Scores on Renting?

While you may think your credit score doesn’t matter for a rental application, it may influence whether you’ll be approved for a lease. However, although landlords look for higher credit scores, a low score doesn’t mean you’ll immediately get denied for a rental home.

After all, many landlords or property management companies have their own specific requirements and criteria for evaluating rental applicants. That said, the requirements or the impact of credit scores may vary depending on the rental market or the type of property you want to rent.

A good credit score can help in several ways. For instance, it may give you more negotiating power for your rental terms. Landlords may be willing to lower their security deposit or give more favorable terms for tenants with excellent credit. On the other hand, a lower credit score may result in less favorable terms or higher upfront costs.

Additionally, landlords may prioritize applicants with higher credit scores in competitive rental markets. So, if multiple applicants are trying to secure the same property, having a solid credit score can give you an advantage over other applicants with lower scores.

What Credit Score Do You Need to Rent?

The specific credit score requirement to rent a property can vary depending on several factors. For instance, some landlords don’t have a minimum requirement, or it may depend on the location and type of property. That said, no universal credit score requirement applies to all rental situations.

Here’s a general guideline of credit scores and what they mean for renters and landlords.

• Excellent Credit- Credit scores above 740 are typically considered excellent. Having excellent credit can improve your chances of being approved for rental applications and may help you negotiate more favorable terms.
• Good Credit- A credit score between 670 and 739 is considered good. This credit range is still positive and is generally sufficient to secure a rental lease.
• Fair Credit- Credit scores between 580 and 669 are considered fair. While you may think that a fair credit score can make it more challenging to secure a lease, that’s generally not the case. Depending on the property and the location, most landlords look for a score of 600 to 650 or higher.
• Poor Credit- Credit scores below 580 are typically considered poor. That said, renting a property with a poor credit score may be more difficult. However, some landlords may be willing to work with you if you demonstrate other positive factors, like a stable income, positive references, or a co-signer.

Ultimately, it’s important to note that credit scores aren’t the only factor landlords consider while reviewing rental applications. However, to increase your chances of being approved for a rental, you’ll want to maintain a good credit score and demonstrate financial responsibility and stability.

Options for Renting With a Low Credit Score

While it’s important to understand the impact of credit scores and reports, they don’t hold all the weight while reviewing rental applicants. Although it’s best to have a good credit score while renting, you can still get approved for a rental with a lower score. Communicating effectively and explaining your situation during the screening process is important. So, here are a few ways to secure a lease with a lower credit score.

1. Explain Your Situation- Be extremely honest with your landlord or property manager about your credit history. Explain why your credit score may be low, whether you’re dealing with medical bills, divorce, or other financial situations, and your landlord may be more lenient.
2. Show Proof of Payments- If your credit score is low, but you’ve always paid rent on time, show your potential landlord proof of your on-time rent payments. That way, they can see that you’re reliable and may be more willing to rent to you.
3. Get a Letter of Recommendation- A letter of recommendation from a previous landlord can help boost your chances of renting with a low credit score. If another landlord can vouch for you and put in a good word, it may be easier to secure a lease.
4. Offer a Higher Security Deposit- If you can afford to do so, offer a higher security deposit to give your potential landlord more peace of mind. Additionally, if you cannot pay rent at some point, your security deposit can act as a buffer.
5. Use a Co-signer- If you have poor credit or none at all, you may need a co-signer. Then, if you miss a payment, it’ll fall onto your co-signer. However, having a financially responsible co-signer is important, as your landlord will also look into their finances.

Find Reliable Tenants With Property Management

It’s important to recognize the impact of credit scores while screening tenants for your rentals. Checking a prospective tenant’s credit history can reveal whether they typically pay bills on time and are financially responsible. After all, you want to ensure your tenant will pay rent on time each month.

In turn, it’s crucial to have a thorough screening process to ensure you find reliable tenants for your rentals. Hiring comprehensive property management can help you find and screen potential tenants, collect payments, maintain properties, and more.

Bay Property Management Group offersfull-service property managementaround Baltimore, Philadelphia, Northern Virginia, and Washington, DC. So, if you need help managing and maintaining your properties, contact us today to learn more about our services and how we can help your rental business succeed.