I Have Bad Credit: How Can I Rent an Apartment?
Tenants with bad credit, students whose parents are paying for their apartment, or those whose income levels are below the landlord's minimum standards may still be able to sign a lease if they have someone to co-sign the lease with them, and act as their lease guarantor. Not all owners and property managers will accept guarantors, but many of them do. Below are the steps and tips you should follow if you find yourself in one of the above situations.
Information on Renting with Poor Credit
1.) Find a Co-signer or Guarantor
Basically, any adult can be a guarantor. However, they will have to meet certain financial standards, just like the tenant. These standards (see below) are generally higher, since the landlord is taking the chance that if you don't pay your rent, the guarantor will be able to pay both their own rent (or mortgage) and your rent.
Among owners and property managers of apartments who accept guarantors, there are a wide range of conditions. For example, some may only accept local co-signers, or only those who reside in-state. Some may accept those in neighboring states. Still others may accept only those residing in the US, or residing in selected US states. This has to do primarily with the ease of collecting the money from your co-signer in the event you don't pay, and in some cases it has to do with laws in certain states making it more difficult to sue for payment.
Some landlords will only accept one guarantor per lease. Others may allow multiple guarantors--usually in the case of roommates. In some cases, each guarantor will need to qualify individually, while in other situations the landlord may allow the guarantors to qualify jointly.
The standard income requirements are generally the guarantor's income be double that of what is required of the tenant. For example, in Manhattan the tenant is normally required to earn 40 times the monthly rent. Therefore the guarantor would be required to earn 80 times the monthly rent. The landlord wants to ensure that the guarantor has sufficient funds to pay for both your apartment, and their own home. Of course, they also must have good credit, and/or sufficient money in the bank.
Landlords who consistently rent to college students are often more lenient about guarantors than others. However, this can certainly vary, especially by location. Whereas a property owner or manager in a college town may be flexible with students, a landlord in a major city with high demand for rental apartments (such as NYC) may look at you no different than any other tenant.
For exact details, always consult the owner or property manager of the rental apartment that you are interested in. They will let you know what they will accept.
2.) Ask if the Landlord Accepts Co-signers or Guarantors
If you are in one of these situations, you should discuss it with the landlord prior to viewing the apartment, or when you view the apartment. If they are open to a cosigner or guarantor, great. However, you don't want to waste your time and money on an application if you are going to be rejected outright because of your situation.
If you have bad credit, sometimes it may help to explain why. Now, if you just ran up a bunch of credit cards buying shoes at Saks, keep your mouth shut as to why. However, if your bad credit is due to unexpected medical bills, some landlords will be more understanding. Remember, the landlord is going to be checking your credit report, so be honest. Don't tell him or her that you had medical bills, and then have the credit report come back showing something else.
Keep in mind that smaller, private landlords are more likely to work with someone with poor or no credit, than large companies. Those companies often have a set of criteria that they are very strict with, and often do not consider individual circumstances.
3.) Both You and Your Co-signer Will Submit an Application
With few exceptions, the owner or property manager will require that guarantors submit the same paperwork as the tenant (see our section on Rental Agreements and Application Requirements). Whomever is acting as your guarantor will be subject to the same scrutiny as you are.
In some cities, that may entail just filling out an application. Other markets, such as Manhattan, will require a lot of documentation, along with your application. Items such as bank statements, tax returns, letters of employment and more may be required. Always be sure to ask exactly what the landlord needs to process your application, and when.
What are my Options if I Can't Get a Co-Signer?
There are companies, such as Insurent, that are insurance programs which act as lease guarantors for those who have good credit, or for non U.S. persons or U.S. persons who have no credit, but still require a cosigner. For example, you have good credit, but your income level is not quite high enough to meet the landlord's minimum standards.
Another example would be if you're coming from a foreign county, have enough income, but haven't established a credit history here in the US. There are landlords in a number of cities across the US that accept Insurent. For more information, please consult their website. They help out thousands of people each year get an apartment that they otherwise would have not been able to qualify for.
Designed specifically for those with bad credit, WeCosign acts as a guarantor as well. The concept is similar to Insurent, except in this case they will accept people with poor or bad credit. You can check out their website for more information.
Another option is to ask for a written recommendation from prior recent landlords (preferably your current landlord) stating that you always paid your rent in full and on time. This shows the landlord that you have been responsible in paying the rent, despite your financial difficulties.
If you can afford to do so, paying for several months (or the entire year) of rent upfront is another tactic. This way the owner of the apartment that you want doesn't have to worry whether or not you are going to be able to pay each month. Keep in mind that just having the money in the bank will probably not be enough. After all, you could spend it after your application is approved! The landlord is going to want you to write them a check when you sign the lease.
The last option would be to offer to pay a larger security deposit. Perhaps the landlord won't let you pay several months of rent upfront but often they will allow you to put extra money in your security deposit. That way they know they have a pool of money to access, in the event you can't pay.
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