Credit Repair

A Good Credit Score Will Help You Get the Best Apartment

Finding the perfect apartment, especially in a major city, can be a challenge. The last thing you want is to be denied your dream home because of your credit score. Here are some ways you can improve your credit score now to help you find your next “home sweet home.”

How credit affects your ability to get a lease

Before a landlord offers you a lease, she’s going to want to make sure you’ll be able to keep up with the monthly rent. One way she may do this is by checking your credit score.

Your credit score is a measure of your likelihood to repay debt. It’s calculated by analyzing pieces of your financial profile such as your credit utilization ratio, your record of on-time payments, how much debt you currently have, what type of debt it is and the length of your credit history.

“No landlord is going to want to lend to you if you can’t actually make payments,” said Brittan Leiser, a financial advisor at One Seven in Beachwood, Ohio. “If they look at your credit and see that paying rent may be an issue for you or was in the past, they may overlook you in favor of someone else who can give them that rent check.”

This is particularly important in competitive housing markets where there are multiple renters vying for the same unit. If two candidates look similar on paper except for their credit scores, the landlord could use that as a determining factor in his decision.

If you’re going to be moving in the future and want to improve your credit before you do, take action now by following these simple steps.

5 steps to improve your credit score

There’s no shortage of businesses willing to help rebuild your credit for a price — some more reputable than others. But there are also plenty of things you can do to improve your credit on your own.

1. Check your credit report for mistakes

A lot of people have never seen their credit report, but it’s important to review it regularly to make sure all the information is accurate. “You may have an error or some issue with your score you might not have noticed,” Leiser said.

Once a year, you’re entitled to a free copy of your credit report from each of the three credit reporting agencies, Experian, Equifax and Transunion. To access yours, head to AnnualCreditReport.com. You’ll need to provide your name, address, Social Security number and date of birth.

If you find a mistake on your credit report — from a misspelled address to an account you didn’t open — you’ll want to dispute it in writing with the reporting agency. The federal government has a template letter you can use as a guide. You’ll also want to provide supporting documents that back up your claim. It’s a good idea to send your dispute claim via certified mail and ask for a return receipt.

2. Get organized to pay your bills on time

“Paying your bills every month on time doesn’t just mean your debt,” said Leiser. “It’s about establishing yourself as someone who has routinely and consistently paid your bills on time, and is key to improving your credit.” That means you need to stay current with your rent, your utilities and any other payment that, left unpaid, could end up in collections.

Payment history plays a large role in determining your credit score. You don’t want to miss any payments, even by accident.

Leiser recommended using a phone reminder or calendar app to remind you when it’s time to make a payment. Setting up autopay on monthly accounts can also protect against late payments. Just make sure you have enough money in the bank to cover your bills.

3. Pay off current debts

There are a few ways that paying off debt can improve your credit score. One element of your score is your total unpaid debt, so lowering that figure can be beneficial. Another factor in your score is whether you’ve had a debt sent to collections, a foreclosure or a bankruptcy, and how long ago.

Paying off debt will also help improve your credit utilization ratio, which is your total debt relative to your overall credit limit. If your credit card balances are near their limits, that could have a negative impact on your credit.

4. Get a credit builder loan or secured credit card

It might seem odd to think of getting more credit to improve your credit, but since your credit score is a measure of how well you can repay debt, healthy debt could help you. Two basic options for achieving this are secured credit cards and credit builder loans.

With a secured credit card, you put money down as a deposit, usually $50 to $300. That money then becomes your credit limit. This way, you’ll never be in a position where you can’t pay your credit card because you’re funding it ahead of time. The credit card company makes monthly reports to the credit bureaus, which helps build your credit. Make sure you compare credit cards to find the best one for you. Look for cards that offer a graduation option so you can transfer from a secured card to a traditional card once you rebuild your credit.

Another option is a credit builder loan. With this type of loan, you must must make a deposit in the full amount before you can access the funds. This is why they are sometimes referred to as credit builder savings programs. As the names suggest, the point of these loans isn’t access to money so much as building credit. The bank will report your payments to the credit bureaus, which should increase your credit score. These loans are typically available from smaller financial institutions like credit unions and local banks.

Before you sign for a credit builder loan, make sure you will be able to keep up with the monthly payments. If something happens and you slip up, it could have a negative effect on your credit.

5. Limit hard credit inquiries

In the world of credit checks, there are hard inquiries and soft inquiries. Hard inquiries typically occur when a lender or creditor is deciding whether to approve you for a loan or new account. These are recorded on your credit report, and too many in a short period of time can damage your score.

Soft inquiries are credit checks that typically are not associated with a decision to extend you credit. For example, if you or an employer checks your credit score, that is a soft inquiry. Soft inquiries will not affect your score.

If there are too many hard inquiries in a short time on your report, you might inadvertently signal to the credit reporting agencies that you’re in some sort of financial trouble or are acting irresponsibly. That’s why you should keep hard inquiries to a minimum, especially when you’re trying to improve your credit. Don’t open new credit cards at the checkout counter just because the salesperson offers you 10% off, and if you’re shopping for a big purchase such as a vehicle, ask your salesperson not to do a hard credit check until you’re certain you’ve found the car you like.

Help make the case for why you’re the best possible tenant

While boosting your credit score can help, there are other ways to improve your chances with a prospective landlord. Providing letters of recommendation from former landlords and employment and income verification can help show that you are a responsible and stable candidate. If you don’t have enough time to clean up your credit score before applying for a new apartment, offer the landlord a letter of explanation to show you are aware of the problem and working on it.

Plan now to qualify for the apartment of your dreams

If you don’t have great credit, it could take some work before you qualify for your dream apartment. But it’s probably not out of reach. Start working to improve your credit today so you can be ready when it’s time for you to sign a new lease.

 

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