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?
It’s not uncommon to be rejected when applying for a rental property. The reasons vary, but they usually come down to two things: you don’t have enough money or your credit score isn’t good. If you are in the latter category, this article is for you. This article will cover how to make sure that doesn’t happen and what it means if it does happen.
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.
What do owners check?
Landlords typically check credit scores and rental history to decide whether to rent to a tenant. They may also check criminal records and employment history. Landlords may also require a security deposit and/or last month’s rent in advance.
What is a credit score?
A credit score is a three-digit number that represents a person’s creditworthiness. The higher the score, the more likely it is that the person will repay their debts. A credit score is based on credit reports, which are compiled by credit bureaus.
How can I improve my credit score?
There are many things you can do to improve your credit score. Some steps include paying your bills on time, maintaining a good credit history, and using less of your available credit. You can also get a copy of your credit report and check for errors. If you find errors, you can dispute them with the credit bureau.
Can I rent if I have a low credit score?
It depends. Some landlords may be willing to rent to you if your credit score is low, but they may charge you a higher rent or require a security deposit. Others may not rent to you at all.
What is a credit report?
A credit report is a document that contains a person’s credit history. It includes information such as the person’s name, address, Social Security number, and credit scores. It also includes information about debts and payments. Credit reports are compiled by credit bureaus, which collect data from creditors such as banks and credit card companies.
Can I get a copy of my credit report?
Yes, you can get a free copy of your credit report every year from each of the three credit bureaus. To get your reports, visit AnnualCreditReport.com.
What if I have a dispute on my credit report?
If you have a dispute on your credit report, you can contact the credit bureau that compiled the report. You can also contact the creditor that reported the information. The credit bureau will investigate the dispute and will notify you of its findings.
How do landlords check credit scores?
Landlords typically check credit scores through a tenant screening service. These services provide landlords with access to credit reports and credit scores for a fee.
If my landlord does a credit check, will they see my score?
It depends on the tenant screening service that the landlord uses. Some services provide landlords with the credit score, while others provide only the credit report.
What is a security deposit?
A security deposit is a sum of money that a tenant pays to a landlord when they sign a lease. The security deposit protects the landlord from damages that may occur during the tenancy. The amount of the security deposit varies, but it is typically one month’s rent.
What is last month’s rent?
Last month’s rent is the amount of money that a tenant pays to their landlord for the last month of their lease. This money usually goes toward the security deposit or rent for the next month.
If I have a low credit score, can I still get a rental property?
It depends on the landlord and the rental property. Some landlords may be willing to rent to you if your credit score is low, but they may charge you a higher rent or require a security deposit. Others may not rent to you at all.
If I have a low credit score, should I still try to get a rental property?
It depends on your goals and priorities. If you are looking for a long-term housing solution and you are willing to work on your credit score, then yes, try to get a rental property. If you are only looking for short-term housing, then it may be wiser to wait until your credit score improves.
What is an employment history?
Employment history is a record of a person’s past jobs. Landlords may check a person’s employment history to see if they have a stable job history and whether they are likely to stay in the area.
Can I get a rental property if I have a gap in my employment history?
It depends on the landlord and the rental property. Some landlords may be willing to rent to you if you have a gap in your employment history, but they may charge you a higher rent or require a security deposit. Others may not rent to you at all.
What is an eviction?
An eviction is when a tenant is forced to leave their rental property by the landlord. This can happen when the tenant fails to pay rent, violates the terms of their lease, or causes damage to the property.
If I have been evicted in the past, can I still get a rental property?
It depends on the landlord and the rental property. Some landlords may be willing to rent to you if you have been evicted in the past, but they may charge you a higher rent or require a security deposit. Others may not rent to you at all.
Can I get a rental property if I have a criminal record?
It depends on the landlord and the rental property. Some landlords may be willing to rent to you if you have a criminal record, but they may charge you a higher rent or require a security deposit. Others may not rent to you at all.