Credit history plays a major role in securing many of the things you need for everyday life from lines of credit, utilities, and even an apartment. Landlords often conduct a credit check or ask for credit references before approving rental applications. However, not everyone has a credit history: recent high school and college students, for example, often do not have credit, which can affect their ability to secure an apartment.
If you haven’t started building your credit history yet, but you’re ready to rent an apartment, here are a few things that you can do to work around your credit history and have your rental application approved.
Why credit history is important for a rental
Landlords usually require information such as a background check and a credit check before approving a rental application. Background checks illustrate whether or not an applicant has ever been brought up on criminal charges or evicted from a prior rental. A credit check showcases an applicant’s past credit history, including his or her credit score and other financial obligations.
Landlords use the information presented on a credit report to determine if a prospective tenant will be an asset or a liability. If your credit history is in good standing, the chances that your rental application will be approved are greater than they would be if your credit is lacking. Property owners see those who have good credit as individuals who will likely pay their rent on time and in full, while those who have a poor credit history are more likely to make late payments or miss payments altogether.
If you don’t have a credit history, a prospective landlord can have a hard time determining if you are an asset or a liability. However, just because you don’t have an established credit history doesn’t mean that you won’t be able to secure an apartment. Below, we highlight several ways that you can successfully rent an apartment, even if you don’t have a credit history.
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Renting an apartment without credit
There are several ways that you can work around your lacking credit history and secure your first apartment.
Supply proof of income
The primary reason why a credit history is an important factor for a rental is that it helps a landlord determine if the rent will be paid on time. If you don’t have a credit history but you do have a stable job, supplying proof of your income may be an effective substitute for your credit.
Instead of submitting your credit history with your rental application, submit copies of your pay stubs. If possible, show at least six months of pay stubs; if you can provide more, do so. The longer you have been at your job, the more stable your position – and your income. Because a landlord wants to know that you will be able to pay the rent on time, proof of income is often an acceptable alternative for credit history.
Provide a character reference
If you don’t have a credit history, a character reference may be able to help you secure an apartment rental. Ask a trusted and reputable individual or organization to provide you with a letter of reference. A college professor, the coordinator of an organization where you volunteer, an internship supervisor, or your employer are all good options.
The letter doesn’t have to be lengthy. It should simply highlight pertinent information about your character, such as how well you manage your responsibilities and why you would be an asset to the landlord. Be sure to include the writer of the reference letter’s contact information, as the landlord may want to contact them for further details.
Consider a larger security deposit
Some landlords are willing to accept a larger security deposit in lieu of a credit history. Putting more money down may help to ease the property owner’s fears that you won’t pay your rent on time. If you can afford to do so and the landlord agrees, putting down a larger security deposit may help you secure your rental. Note that in some states, like New York, it is illegal for landlords to collect more than one month of rent as security. For others, putting up a large amount of cash is difficult - companies like TheGuarantors offer applicants the option to replace their security deposit.
Get a co-signer
If you don’t have a credit history, a co-signer may be able to help you secure your rental. A co-signer should be someone who has a healthy credit history and credit score. This individual might be a parent, an aunt, an uncle, a grandparent, or even a trusted friend. Should you fail to make payments, the landlord could call on the co-signer to fulfill your debts. Because the cosigner has a good credit history, having this individual on your lease can help to set aside any worries that the landlord may have about not receiving regular payments.
Find a third party guarantor
If you are unable to obtain a guarantor, you can seek third party options like TheGuarantors. The company helps applicants that do not meet the landlord's financial requirements (often, those without credit or with poor credit) get approved. TheGuarantors understand this is a common obstacle, especially for newcomers to the U.S., so for less than one month of rent, an applicant can secure a lease guarantee which will protect the landlord in the event of a default.
Consider private properties
Instead of renting in a large complex, consider renting from a private individual. Often, large apartment and townhouse complexes are owned by property management companies, and these companies require credit checks. If you don’t have a credit history, the chances that your application will be approved are small. However, an individual landlord is more likely to allow you to rent from them, even if you don’t have a credit history. While established credit may not be required, note that you will likely be asked to provide proof of income.
Show your assets
Your assets may be more valuable to a landlord than your credit history. If you don’t have an established credit history but you do have assets, such as a savings account with a healthy balance, a property owner may be willing to approve the rental request. Supply the landlord with a copy of the balance of your savings account or other assets that you may have.
Rent on a monthly basis
Leases on apartments or other rental properties in the United States are generally for one to two years. If you don’t have an established credit history, a landlord may be willing to lease a property to you on a short-term, monthly basis. If, in the event that you are unable to afford the rent, the property owner will have an easier time renting the apartment to someone else, which can ease his or her fears. Additionally, renting on a short-term basis can help you establish your credit history as well as a healthy rapport with your landlord. If things work out, the lease can be renewed for a longer period of time.
Move in immediately
An empty property is a big expense for a landlord. The property owner has to carry the expenses of the mortgage and the utilities him- or herself, which can become quite costly. By offering to move in right away, you can alleviate the landlord’s financial burden, which may make your credit history less of a factor.
Live with a roommate
Maybe you don’t have an established credit history, but maybe someone you know does. If you have a family member, a friend, or even a trusted co-worker with an established and healthy credit history, consider renting an apartment together. The credit history of your roommate could secure you a place to live, while you pay your fair share for rent and utilities. If you choose to go this route, consider drafting a document that illustrates the terms and conditions of the rental; who will pay what, when payments are due, and so on.
Build your credit
Establishing your credit isn’t as complex as it may sound and it doesn’t always take that long. A credit history will do more than just help you rent an apartment; it can help you purchase a car, secure your utilities, get approved for loans, and much more.
There are several ways that you can build your credit quickly. Here’s a look at some of the different strategies that you can use to establish your credit history.
Check your credit history
You might be surprised to find that you actually do have a credit history. Check with one of the credit bureaus to find out if you do have established credit, and if so, where it stands. If you don’t have credit, you can work on building it. If you do have a history and it’s less-than-perfect, you can work on improving it.
Set a goal
When it comes to your credit score, a rating of “excellent” is the goal; between 750 and 850. While the average credit score most landlords will accept is 600 or higher, an even higher score will put you on a healthy financial path.
Take out a secured line of credit
Instead of an unsecured credit card, which requires careful financial management, consider applying for a secured credit card. With this type of credit card, you pay the issuer a specific amount of money in advance. If you pay $400, for example, the lender can issue you a credit card that you can use to charge up to $400.
A secured credit card can help you establish your credit quickly and better manage your finances. Explore your options as there are numerous secured credit cards out there, but you should note that some have charge fees.
Take out a car loan
While you do need to have established credit to take out an auto loan, a co-signer can help you get approved. A co-signer can be anyone you know and trust who has a healthy credit score such as a parent, a grandparent, a sibling, or a friend. If you end up not being able to make loan payments, the co-signer would be responsible for taking over your debt.
By taking out a car loan with a co-signer, you’ll be able to build your credit history and eventually get the apartment that you desire; plus, you’ll have access to reliable transportation.
Make timely payments
If you have a cell phone bill or any other bills, make sure to make timely payments. Utility and service providers keep track of your payment history and report it to U.S. credit bureaus. If you make late payments or you miss payments, your credit history will be negatively impacted. If you make timely payments, your credit score will rise. Whenever possible, make payments in-full, as completely paying off your debt will help your credit score increase even more.
Keep tabs on your credit
While you are building your credit, it’s a good idea to get in the habit of monitoring it. Any new secured lines of credit, auto loans, or other debts that you acquire to build your credit need to be properly managed and monitored closely.
Avoid running up your credit cards. While it may be tempting to pull out your charge card, the higher the balance you carry, the harder paying it off will be. Carrying a lower balance on your line of credit shows lenders, credit bureaus, and landlords that you are responsible with your money.
Your credit history is extremely important. Lenders, service providers, and even prospective employers will largely consider your spending habits and your debt management when determining if you are a liability or an asset. Landlords also take the credit history into consideration when they’re determining whether or not they should lease the property to prospective rental applicants.
If you haven’t established credit yet, don’t fret; there are ways that you can successfully rent a property without credit. The above-mentioned methods have been proven to be effective for renting an apartment without a credit history. It is important to note, however, that not every strategy will work for every person. The needs of each individual vary, as do the requirements of a property owner.
Speak to your prospective landlord and be open about your credit history. Let the property owner know what your situation is and why you haven’t established credit yet. Discuss what options he or she might consider in lieu of a credit report. Figure out which option will work best for you – and your landlord – so that you can successfully secure a lease.
How Nova Credit can help you establish credit
A credit score is important for anyone who resides in the U.S., permanent residents and non-residents, alike. While you can take the steps above to build your credit, you can now use Nova Credit to translate your international credit history into an equivalent report for U.S. lenders. Companies partner with Nova Credit to incorporate that information directly into their application process and make it easier for you to get approved for credit cards, loans and other products including apartments. Once you establish a U.S. credit account using the credit you’ve earned, you can start building a local credit history.
Nova Credit currently connects to international credit bureaus in Australia, Brazil, Canada, India, Mexico, Nigeria, South Korea and the UK.
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