Having a good credit score is not only essential to securing loans like a car loan or mortgage but when renting an apartment as well. Landlords rely on credit scores as a tool to assess how big a financial risk they are faced with if they choose to rent to you.
Your credit scores often play a huge role in your ability to secure an apartment, in fact, some landlords won’t accept your application if you have bad credit, even if you have a decent income and good references.
Luckily, there are actions you can take to increase your chances of finding a good apartment despite having bad credit.
How To Rent An Apartment With Bad Credit
Although bad credit may diminish your chances of finding an apartment, these steps will help you focus on other aspects of your rental application to improve your candidacy as a future tenant.
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. These are the landlords you want to look for.
Oftentimes, these are not landlords from property management companies that run big apartment complexes. Those organizations are often more strict in their requirements from prospective tenants, and thus will require a strong credit score from you.
However, finding an individual or partnership owner of a unit increases your chance of finding a landlord that will consider an application without a credit check. It’s important to note that you will often need to compensate in other ways to encourage such a landlord to take this risk. Be prepared to have a solid source of income that you can prove, as well as strong references.
How To Find No Credit Check Apartments
There are a few possible avenues that can help you find a landlord who will consider your application without a credit check:
ONLINE PLATFORMS
There are various online platforms where individuals can post ads for new tenants or roommates. Craigslist and Kijiji are popular examples where you can find rental listings for apartments, condos, townhouses and houses. Facebook Marketplace also hosts many groups specific to tenants looking for rental units, as well as neighbourhood groups that sometimes advertise specific rental units in that particular area.
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REAL ESTATE AGENTS
Real estate agents are a popular tool for prospective tenants looking for a place to rent because they do not charge to find you a place (their fee is paid by the landlord). Landlords, especially individual homeowners, commonly use real estate agents to help navigate the tenant market and to handle all of the paperwork.
Once you find a real estate agent, make sure to ask them to show you listings that do not require a credit check, or to tell you about listings that they think have owners that could be swayed without a credit check if you have a high income, for example.
Pay In Advance or Increase Your Rent Offer
If you’ve managed to find a landlord willing to relax their tenant qualification of a credit check, it’s likely they might want something in return. You might need to make your application more appealing in a different way, which can include paying a few months in advance or increasing your offer of the monthly rent. While it is illegal in Canada for landlords to ask for security deposits or months of rent in advance, you are within your rights to offer more with your application.
Tenant rights and responsibilities across Canada
If your budget can handle it, you might be able to secure a unit by offering an extra 30$ of rent each month, for example. Or, if you have enough savings, you could try to sway the landlords with 3 months of rent upfront instead of the first and last months. Using a financial incentive to make your application more appealing can help landlords feel less concerned about your bad or lack of credit. Actions like these demonstrate your commitment to the unit, and can actually help them out if they were short on cash this month.
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Use A Cosigner Or A Guarantor
Sometimes, your own history and application just won’t be strong enough for a landlord. Especially in larger cities, competition between tenants can be fierce; so, you’ll want to consider all possible ways to strengthen your application.
Having a cosigner or guarantor should be a last-resort idea; however, it can sometimes make or break a rental application. If you choose this route, you’ll need to ensure your cosigner satisfies the necessary credit qualifications. Trusted friends and family members are good candidates for cosigners. They should be someone close to you, as they will need to assume some sort of risk in agreeing to cover your rental payments if you happen to default on your rent.
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 demonstrate the following:
- Stable job – A stable job can be proven with recent, consistent pay stubs demonstrating your bi-weekly income.
- Debt-to-income ratio – If you have enough income to pay for your rent, other debts and living expenses with ease, you’ll want to demonstrate this to your prospective landlord. You can calculate your debt-to-income ratio and add a printout of it to your rental application.
- Savings – Despite having bad credit, a cushy 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 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. There are two types of references you’ll want to use for a rental application:
Rental References
Many landlords may ask for a rental reference. These references can really help your candidacy as a tenant if you’ve had a good relationship with your previous landlord. Future landlords may use these rental references to contact your previous landlord in order to gauge what kind of tenant you were. These references can provide them with information about how responsible you were with the rent payments and if you were a good tenant overall.
Credit References
Credit references are from people who have had a financial relationship with you. These references can speak to your sense of financial responsibility. Some examples include your bank, previous landlords, employers, or business partners. Before using a credit reference, make sure you have settled most if not all of your debt with the person you are asking for the reference from.
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.
What Landlords Look For On A Credit Report
We know that landlords check the credit reports of potential tenants, but what exactly are they looking for?
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.
Debt Levels
Landlords may check to see how much debt your carry and how many different credit accounts you have. High levels of debt, especially consumer debt, could be a red flag for certain landlords. A lot of debt can make it hard to keep up with rent payments.
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.
Renting With Bad Credit FAQs
What is the minimum credit score for renting an apartment in Canada?
Can I rent an apartment with a collections account on my credit report?
Is it easier to rent a house or apartment with bad credit?
Final Thoughts
Having bad credit can pose some problems in finding a rental unit. The good news is that there are many mitigating actions you can take to help a landlord recognize your worth as a decent tenant. With strong proof of income, personal references and appealing negotiation of rental costs, you can offset the effects of your bad credit score in no time.
Glossary
| TERM | DEFINITION |
|---|---|
| Business Credit Report | A detailed report that is meant to provide potential lenders with information to allow them to determine the business’ creditworthiness before extending credit. There is much more information in a business credit report when compared to an individual’s credit report. Business credit reports are generated and regulated by the credit bureau. |
| Business Credit Score | A number that represents a business’ creditworthiness based on information within the credit report. The credit bureau calculates and regulates business credit scores. |
| Consumer Reporting Act | A governing body that oversees credit reporting agencies to ensure that personal information is collected, maintained and reported in a responsible fashion. The Consumer Reporting Act also ensures that individuals have the right to know what information is being reported in relation to them and who the information is being reported to. If any of the reported information is incorrect, you have the right to have it corrected under this act. |
| Credit | The extension of money, goods or services with trust that the individual will repay the owed amount in the future. In today’s world, trust of repayment is determined through an assessment of creditworthiness using a credit application. |
| Credit Application | A formal application, required by the majority of lending institutions, that gathers information from the applicant for the assessment of creditworthiness. The form will request information such as personal identification, income and expenses, residency, existing debt, and employment. |
| Credit Bureau | A governing body that collects credit information about individuals and sells it to other entities that are in the business of extending credit for a fee. Credit bureaus are also referred to as consumer reporting agencies and credit reporting agencies. In Canada, there are two credit bureaus, TransUnion and Equifax. |
| Credit Card | A financial product that allows cardholders to purchase goods and services using credit. The amount spent in a particular period becomes due at a specific date. If the amount is not paid on that date, interest will come into effect. Credit cards are a physical, plastic card. |
| Credit Limit | When a creditor extends credit to a consumer it comes with a credit limit, this is the maximum amount the consumer can borrow. |
| Credit Rating | Credit bureaus collect information about your personal finances and rate you to give potential lenders an easy way to assess your creditworthiness at first glance. There is a rating system in place for consistency and to protect from bias. Credit ratings are different from credit scores but are often used interchangeably. Your credit score actually determines what credit rating you’re given. As an example, if you have a credit score of 850, you’d be given a credit rating of “excellent”. |
| Credit Repair | The act of improving your credit score by removing inaccurate information from your credit report and working on healthy, responsible financial habits. |
| Credit Report | A credit report contains information regarding your credit history and includes things such as your credit score, payment history, financial debts, record of debt payment, and any black marks on your credit. Credit reports can be obtained from credit bureaus, such as Equifax and TransUnion. |
| Credit Score | A three-digit number that is calculated by credit bureaus using a mathematical rating system and information from your credit report. A credit score falls anywhere between 300 and 900, with 900 being the absolute best. Lenders might have minimum credit score requirements for extending credit which is why it’s important to maintain a healthy credit score. |
| Credit Union/Caisses Populaires | A type of bank that is owned by its members and operates for the benefit of their members. Credit unions are subject to provincial regulation and tend to be small in size and community-oriented. Because of these features, credit unions tend to be a superior way of investing, banking and lending. Credit unions are referred to as Caisses Populaires in Quebec. |
| Creditworthiness | By assessing the historical information associated with a consumers’ finances, creditworthiness is the amount of trust a lender places on a borrower in relation to the repayment of extended credit. Creditworthiness is assessed using a combination of credit report, credit score, credit rating and application information. |
| TERM | DEFINITION |
|---|---|
| FICO Score | A credit score created by the Fair Isaac Corporation. FICO scores are used by lenders to determine a borrower’s creditworthiness before extending credit. Scores range between 300 to 900. |
| TERM | DEFINITION |
|---|---|
| Inquiry | Whenever an entity, including yourself, requests a copy of your credit report, an inquiry is recorded. A hard inquiry is a request from a lender or any other individual that is assessing your creditworthiness. A soft inquiry is a request by you to view your own credit report. A large number of hard inquiries can indicate financial struggles to a potential lender. |
| Introductory Rate | A special promotional interest rate offered by credit card issuers for a specific period of time, such as a few months to a year. The goal with these rates is to attract new customers. |
| TERM | DEFINITION |
|---|---|
| Revolving Credit | A type of credit agreement that allows customers to borrow against a pre-approved credit line when making purchases. A credit card is the most popular form of revolving credit. The borrower is responsible for paying the borrowed amount plus interest each payment period. Revolving credit is also referred to as open-ended credit or charge account. |
