When you’re at the tail-end of a lease agreement, it’s time to find a new place to call home. But if you think the hard part is finding a place that meets all of your requirements, you’re missing a key component of the rental-hunting process.
Renters make up about 36 percent of the nation’s households, according to Pew Research. And before any of those individuals signed on the dotted line, their potential new landlord likely did their due diligence and ran their credit. Before a lease agreement is finalized and a tenant is approved for a home or apartment, landlords will vet them to see if their credit history is free of any evictions, history of late or missing payments, or irresponsible credit habits that could make them a financial risk.
For most landlords, a lower score could be the red flag that prevents you from making it to move-in day. Think of your credit score as the grade point average of your finances. Responsible financial habits like paying your credit card or debt payments on time and avoiding carrying a hefty balance month over month will translate to a higher score. But a late or missing payment, higher balance or too many new credit inquiries could set you up to fail.
How bad credit impacts your ability to rent
Credit scores come in all shapes and sizes. Here’s how to determine which bracket your credit score falls into, according to the FICO credit scoring model, the most commonly used scoring model:
- Exceptional: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
As a general rule, it’s typically recommended that renters try to keep their score near the 620 range or above. But your approval odds can vary depending on the individual landlord. Here’s a look at how many Americans fall into each credit score range, according to Experian.
A number of factors can ding your credit score and hurt your rental approval odds. If you have a history of making late rental payments, a previous eviction, foreclosure, or bankruptcy you could find it more difficult to get the green light from a potential landlord. Other negative credit habits like carrying a higher debt-to-income ratio, defaulting on loans under your name or auto repossessions also demonstrate …….