Having a good credit score is not only essential for securing loans, but it’s also often a requirement for renting an apartment. Landlords often rely on credit scores when vetting prospective tenants as a way to mitigate risk. Even with decent income and good references, you could still be denied a rental if you have bad credit.
Luckily, there are actions you can take to increase your chances of finding a good apartment despite having a bad credit score.
Key Points
- Many landlords check your credit score as part of the tenant vetting process.
- Bad credit could potentially hurt your chances of securing a rental.
- However, you can boost your chances of getting a rental with bad credit by demonstrating substantial income, low debt, and strong references.
Can You Rent An Apartment With Bad Credit?
While bad credit can make it more challenging to rent an apartment, it doesn’t mean it’s the end of the road. Whether you have bad credit or no credit (if you’re a young student or newcomer), there are still many options available to you. In fact, many landlords will only ask you for proof of income and references.
That said, if a credit check is required, there are certain things you can do to help improve your candidacy, such as providing first or last month’s rent, securing a co-signer and having good references.
| What’s considered bad credit? Generally speaking, bad credit is anything under a score of 559. Before applying for a lease — or any other type of financial product — it’s helpful to check your score first to see where you stand. You can do this quickly and for free using online tools like Loans Canada’s CompareHub. |
How To Improve Your Rental Application
Here are a few things you can do to help strengthen your rental application:
Pay In Advance
If your landlord requires a credit check, you could offer a couple of months’ rent in advance as a sign of good faith.
Your landlord may require you to pay a security deposit, often referred to as last month’s rent, to secure a lease. Typically, this deposit cannot be any more than the cost of one month’s rent.
That said, you can choose to offer more money up front to make your application more attractive. Just be wary of potential rental scams that include landlords demanding more money than they’re legally allowed to.
Learn more: Everything You Need To Know About Renting In Canada
Offer Post-Dated Cheques
Giving your landlord post-dated cheques shows that you’ve planned in advance and are committed to paying your rent on time. Being proactive in this way can help offset some of the risk associated with a weak credit profile.
With post-dated cheques in hand, landlords can rest assured knowing that rent payments are already covered for each month. This convenience means they don’t have to hound you for payment, making you a more appealing tenant even if your credit isn’t perfect.
Use A Cosigner Or A Guarantor
Sometimes, your credentials may not be strong enough for a landlord. Especially in larger cities, where competition between tenants can be fierce.
Having a cosigner or guarantor sign your lease can strengthen your rental application. These individuals have good credit and a strong income, and will back you in case you fail to pay your rent. This reduces the lender’s risk and, therefore, helps improve your chances of approval.
Improve Your Finances
Improving your finances is an important step in strengthening your rental application. To demonstrate a strong financial history, you’ll want to show the following:
- Debt-To-Income Ratio: You need to show the lender that you have enough income to pay for your rent after all other debts have been paid. This can be demonstrated by calculating your debt-to-income ratio.
- Savings: Despite having bad credit, a substantial savings account shows landlords that you have a sense of financial responsibility, which can save you in case your income becomes insufficient to pay your rent.
Provide An Employment Letter
A stable job is important, as it shows lenders that you’ll have the consistent income needed to cover your rent throughout the year. To prove this, ask your employer for an employment letter stating your income, job title and how long you’ve worked there.
Provide Solid References
Similar to a job or loan application, apartment rental applications can benefit from having references. Landlords often ask for references as a requirement of the rental application. This is a good opportunity to mitigate the effects of a bad credit score.
Types of references you’ll want to use for a rental application include the following:
- Rental References: Future landlords may use these rental references to contact your previous landlord(s) to gauge what kind of tenant you were in the past. These references can provide them with information about how responsible you were with the rent payments and if you were a good tenant overall.
- Character References: To strengthen the reference section of your application, you might want to consider adding a character reference. These references help vouch for your character and humanize you to a landlord. A family friend, client, co-worker, or past employer are all good options for a character reference.
| Can Landlords Legally Deny Your Application Due To Bad Credit? Yes, landlords in Canada are legally permitted to deny a rental application due to bad credit, as long as the decision is based on actual financial concerns and no discrimination is involved. A poor credit score or history of missed payments can be seen as a risk, and landlords may choose to reject an applicant on that basis. That said, consent is required for landlords to conduct a credit check. If your application is denied due to poor credit, you can request the reason. |
Where Can You Find An Apartment That Requires No Credit Check?
Most ads for apartment rentals demand three things from you: credit score, proof of income, and references. However, there are some landlords who will only ask you for proof of income and references.
Here are a few possible avenues that can help you find a rental spot without a credit check:
- Online Platforms: There are various online platforms where individuals can post ads for new tenants or roommates. For example, Craigslist, Kijiji, Facebook Marketplace, and neighbourhood groups post rental listings for apartments, condos, townhouses, and houses in your local neighbourhood. Many of the landlords’ postings may not require a credit check.
- Real Estate Agents: Many prospective tenants use real estate agents to look for a place to rent. Agents don’t typically charge tenants to find a place, as their fee is paid by the landlord. If you choose to use a real estate agent, ask them to show you listings that don’t require a credit check.
Learn more: How To Find Cheap Apartments For Rent
| What Do Landlords Look For On A Credit Report? Landlords often check the credit reports of potential tenants to check a number of things, particularly their: Payment History – Landlords will check your credit report to review your payment history and habits and to determine if they can trust you to pay your rent each month on time. Delinquencies – Bankruptcy, accounts in collections, and other black marks may prevent a landlord from approving your rental agreement. Certain landlords may feel that these delinquencies make you an untrustworthy borrower. |
Tips To Remember When Renting With Bad Credit
Here are a few tips to remember to help protect you when renting:
Understand Your Rights As A Tenant
As noted, landlords have specific rights when it comes to choosing their tenants. However, tenants also have their own rights that they can expect when applying for and renting a home in Canada. It’s important for you to understand what your rights and responsibilities are as a tenant, as well as those for landlords.
In Canada, tenant laws and rights vary by province and territory, but all aim to protect renters from unfair treatment and ensure livable housing. More specifically, tenants enjoy the following rights:
- Privacy
- Reasonable enjoyment of the property
- Timely repairs
- Written notice before landlords enter the unit
- No eviction without legal cause
- Rent increase controls
Understanding your local regulations is important for asserting your rights. Be sure to find out the specifics in your province.
Tenant rights and responsibilities across Canada
Start Building Your Credit With Rent Reporting Services
Once you start renting, use your rent to help you rebuild your credit score. Most landlords don’t automatically report rent payments to credit bureaus. However, there are third-party services available that can help you report your rent payments to the credit bureaus to help you build good credit, like Landlord Credit Bureau (LCB) and Chexy. Consistent, on-time payments can positively impact your payment history, which makes up 35% of your credit score.
Learn more: Can Your Rent Payments Help You Build Credit?
If You’re Having Trouble With Your Rent Payments, Get Assistance
Depending on where you live, your provincial government may offer some form of rental assistance to help ensure your rent is covered each month. These programs usually provide a monthly benefit to help you cover your rent. Depending on where you live and your financial situation, you may be eligible for a rent assistance program in your province.
Watch Out For Rental Scammers
It can be easy to fall for rental scams, which can leave you in a bad financial situation. The key is to spot the red flags that point to these scams. Here are a few to watch out for:
- The Offer Seems Too Good To Be True: If the offer seems too good to be true, be cautious. Scammers often lure victims with attractive listings or offer super-low rent prices for units that don’t actually exist.
- Urgent Payment Demanded: Be wary if the landlord pressures you to pay a deposit or first month’s rent urgently, claiming other renters are interested or that they’re leaving town soon. Legitimate landlords won’t rush or pressure you for immediate payment.
- Wired Funds Required: Never wire money or send funds using untraceable methods. Once the money is sent, it’s nearly impossible to recover.
- No Showings: Real landlords will be available to show you the unit. If they refuse to show you the place in person for whatever reason, this is a red flag.
- Personal Information Required Upfront: Be cautious if you’re asked for too much personal information upfront.
- No Address: A legitimate listing should include the property’s exact address. If this detail is missing or not provided, be careful.
Learn more: How To Spot A Rental Scammer
Final Thoughts
Having bad credit can potentially be problematic when looking for a place to rent. The good news is that there are several things you can do to strengthen your rental application. With strong proof of income, low debt, and personal references, you may be able to offset the effects of your bad credit score in no time. Otherwise, take some time to boost your score before applying.
