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Why Credit Score Matters When Renting

You’ve finally found the perfect off campus student apartment near KU and are ready to fill out the application when the property manager tells you they have to run a credit check. Whether you’ve got amazing credit, terrible credit, or no credit at all, credit checks are sure to make you feel nervous. Knowing what to expect can put your mind at ease and make the application process run smoothly. Here’s why most landlords perform a credit check. Feel free to contact us today if you have any questions about the application!

What Is A Credit Score?

A credit score is a three-digit number representing how likely you are to repay debt; banks and lenders use this score to decide whether to approve you for a credit card or loan, and property owners look at it before accepting a housing application to determine if you’re a risky renter.

How Is A Credit Score Calculated?

The three main credit organizations, Equifax, Experian, and Transunion, create your free credit score on a scale from 300-850 using the following factors.

Types Of Credit

There are many types of credit that have an effect on the calculated credit score including credit cards, student loans, auto loans, and mortgages. These types of loans play an important role in both your overall credit score and in a landlord’s decision whether a renter is a right fit for the community. As a general rule of thumb, property owners don’t want their tenants spending more than 50 percent of their gross income on rent and bills.

Payment Habits

Consistency is key when it comes to a solid credit score. The manner in which you pay bills (rent, car insurance, credit card, phone, etc.) reflects upon you as a potential renter.  If you make or attempt to make all your payments on time, your credit score shows that and is fairly good; stability is what to strive for, and it’s what a landlord wants to see in potential tenants.

What Are A Good & Bad Credit Score?

There are six different levels to credit scores, going from as low as 300 all the way up to 850. A bad credit score is anywhere between 300 and 599; poor is 600-649; fair is 650-699; good is 700-749; very good is 750-799; and the best credit score is 800-850. Nobody is perfect and sometimes payments are late — life happens. Just because a person has bad credit doesn’t mean they can't rent — landlords aren’t expecting their tenants to have perfect credit.

Why Do Credit Scores Matter When Renting?

If your credit score is below 620, it can signal to a property owner that you’re a risky renter, and they may deny your application. Your credit score and a credit check performed by the landlord could be what separates you from other applicants. Be upfront and transparent about your credit score, let the landlord know why it’s a lower score and what you are doing to improve it.

How Can I Improve My Score?

There are a few key ways to improve your credit score to help get the ball rolling on achieving a better score and renting the apartment you want with no worries. These include:

  • Keep a low credit balance
  • Pay credit card bills on time
  • Become an authorized user for someone with established credit
  • Pay off the entire balance of credit cards
  • Stop applying for unnecessary credit cards
  • Consider transferring balances to another credit card