Explaining Your Credit to a Landlord
Your credit score is one of the many things a potential homeowner can take into account when applying for an apartment. While bad credit can present a hurdle, there’s no reason you can’t confidently cross it with a letter explaining your situation. Find out what to include and use the included sample letter to get started.
What do owners check?
Landlords often check the credit scores or credit reports of potential tenants to see what type of financial risk they are taking with the individual. Your credit report shows:
- The types of accounts you have, such as credit cards, student loans, and car loans
- Credit limits on your accounts
- Unpaid balances
- Payment history
- Minimum payment amounts on unpaid debts
- Credit inquiries
- Foreclosures and short sales
- Overdue accounts belonging to collection agencies
These factors all contribute to your credit score. Your credit score is a three-digit number that is usually between 300 and 850. Different homeowners will have different criteria regarding credit scores. However, a score between 670 and 739 is generally considered “good”, while a score between 580 and 669 is “fair”. If your credit score is below 580, you may have more difficulty securing an apartment.
Keep in mind, however, that different scoring models use different numbers to make up the ranges. Before getting your credit score for a rental, consider asking the owner or management company what model they are using.
A bad credit score and red flags on your credit report can seem like you’re struggling to meet your financial obligations, often submitting rent and credit card payments late, and overdue. of debt than you can afford. This can make a landlord reluctant to hire you as a tenant, but it doesn’t necessarily mean hope is lost.
How a rent letter of credit helps
A letter of credit for rent is simply a letter explaining the status of your credit report. You may hear the term “letter of credit” used in reference to commercial properties where a tenant can get support from a financial institution to help them secure a lease. This is not the letter of credit we are talking about.
If you have bad credit, you don’t have to deny it to a homeowner who performs a credit check. It is better to face the problem head-on. This gives you the opportunity to explain your situation and provide proof that you are actively working to repair your credit score. If you know that a potential landlord will check your credit, include a letter of explanation with your rental application so you can anticipate this problem.
How to write a letter explaining bad credit
Before you can write a detailed letter explaining your credit situation, you need to fully understand it. Request a copy of your credit report from one of the three credit reporting agencies: TransUnion, Equifax, or Experian. You are entitled to one free copy of each per year. When you’re actively working on your credit, it can be helpful to space them out and review a report every four months so that you always have an eye on the situation.
Examine your credit report for red flags that will stand out from your potential owner, such as:
- Missed payments
- Accounts submitted to collection agencies
- High balances
You should address these warning signs openly in your letter and provide an honest explanation. Many landlords are sympathetic to tenants who have had a difficult history as long as they are determined to make positive changes in the future. When explaining the situation regarding late or missed payments, you should also explain how you plan to avoid them in the future.
Sample Letter: Explaining Bad Credit to a Homeowner
The following is a sample letter explaining bad credit to a homeowner. You can use it as a general template for your own letter.
I recently shot [apartment complex] sure [date] and was very impressed with the community. You have a great location close to my workplace and some great amenities like the playground which I know my kids would enjoy. I submit a request for [#]- bedroom unit in your complex. I understand that you are performing a credit check as part of the application process and would like to provide additional information about my credit history.
As you will see, I had a hard time with the late payments of [month] at [month] in [year]. I faced financial hardship during this time due to [explain your reasons, such as being laid off, having unexpected medical expenses, etc.]. I have since [explain your resolution, such as securing a good job, setting up a payment plan for your medical bills, etc.].
I am working hard to repair my credit and have created a budget for my family which will help me keep control of those bills as well as my rent payments and other expenses. A copy of this budget and my proof of income are attached. I have also included the last three months of bank statements showing my monthly income and expenses.
I can also provide you with:
- [Detail other documents or provisions that you are willing to make]
Despite my credit history, I believe I would make a great tenant in the [location] community. If you have any other questions or concerns, you can reach me at [phone number] or [email]. Thanks for your consideration.
Tips for finding an apartment with bad credit
If you are able to take extra steps to compensate for your bad credit, it can increase your chances of getting an apartment with a low credit rating. Some things you can gift include:
- A co-signer with good credit
- Rent for the first and last month in advance
- A larger deposit
- Larger monthly payments
- Automatic payments
Don’t let a bad credit history put you off looking for a good apartment. Take a proactive approach to this delicate situation and you might impress your landlord with your honesty, openness, and commitment to taking charge of the situation.
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