What Is a Good Credit Score for Renting an Apartment? How Low Will Landlords Go?
Renters: You may know your budget and the number of rooms you need, but do you know your credit score? Also called a FICO score, your credit rating is a number that expresses your creditworthiness, i.e., whether or not you're a risk to lenders based on your previous financial history.
"After your social security number, your FICO credit score is the most important number in your financial life," says Ivan Chong, founder of LazyFinances.com, a personal-finance advice site.
So why does your credit score matter so much if you're renting property? Because it details your history of paying off—or not paying off—debts. A landlord uses it to see how likely you are to pay your rent on time. The lower your credit score, the less likely your property manager is to accept your rental application. That means this three-digit score could make the difference between landing that dream two-bedroom or settling for a so-so pad with dated appliances. Which brings us to an important question: What's the lowest credit score you need to rent an apartment?
Breaking down a credit score
A credit score can range from 300 to 850. But don't worry if you haven't hit magic number 850. Anything above 750 is generally considered an excellent credit score. From there, credit scores are considered good (700 to 749), fair (650 to 699), or poor (lower than 650).
How credit scores are calculated
Credit scores are calculated by the credit bureaus Experian, Equifax, and TransUnion. Chong breaks down the five factors the bureaus use that impact your credit score and how they are weighted:
Payment history (35%): The single most important factor in determining your credit score is your track record of payments for credit cards, installment loans, and mortgage loans.
Late payments impact your score depending on how late the payment was, how much you owed, how long ago it happened, and the total number of late payments.
Credit utilization (30%): This looks at how much available credit you have compared to the balances you owe. The higher your credit utilization, the lower your score. For example, if you had a credit limit of $5,000 and a balance of $4,000 on a credit card, your utilization rate would be high, at 80%, and that would lower your score.
Length of credit history (15%): The age of your oldest account, newest account, and the average age of all of your accounts make up this calculation. To maximize your FICO credit score, don't close old credit card accounts.
Credit mix (10%): The types of accounts you're currently using also play a role. The two categories are revolving accounts such as credit cards and installment loans like auto loans. Having a credit history with at least one of each will have a positive impact on your overall credit score.
New credit (10%): The number of accounts you’ve opened recently, as well as your credit inquiries from the past two years, also impact your score.
How to check your credit score
"You are given one free credit report a year by each of the three major reporting sources, Experian, Equifax, and Transunion," says Ian Wolf, a licensed real estate salesperson with Douglas Elliman in New York City. You can claim yours at Annualcreditreport.com.
You can also check with your bank, credit card company, or an online personal finance company like Credit Karma, since some offer a free credit score. And luckily checking your own credit report (what is called a soft inquiry) won't negatively affect your score, so check as often as you like. A hard inquiry—in which you apply for a new line of credit and a potential lender reviews your credit information—can affect your score.
Lowest credit score needed to rent property
A high FICO score on your credit report shows you're good at paying your bills, whether they're from a car loan or credit cards. But a low score could cause your potential landlord to think you are more likely to miss rent payments. That's why if you're looking to rent, your credit score is important.
"Anything 700 or higher is good," says Wolf. "In general, if your score is under 680, you will begin to have difficulties renting."
"Credit scores below 600 means an individual probably has at least two collections on their credit report, which means they are a credit risk," adds Chong.
What to do if you have a low credit score
But don't lose hope of renting if you have a lower score.
"It really depends on the particular landlord and what they will consider acceptable for a credit score," says Wolf. "Sometimes landlords will consider a tenant with a score in the 600 to 680 range if they have some form of an additional deposit, in case there are future problems."
Another option is to have a guarantor co-sign your lease, offering payment backup to make the landlord feel more secure.
But if you have a good reference from a previous landlord and a steady job with paystubs to prove you meet the landlord's income requirements, you should be fine.