Credit Score Basics for Renters: What You Need to Know in 2024

As the peak rental season is getting closer, your credit score becomes more important than ever. Whether you’re renting for the first time or you’re a seasoned tenant, knowing the credit score basics for renters is key.

Credit scores might seem complex, but they’re pretty straightforward. Simply put, your credit score is a number that comes from analyzing your credit history and it shows how reliable you are financially.

That said, the importance of credit scores in renting is paramount these days. Your credit score acts as a first impression, especially if you’re a first-time renter — and even more so if you’re looking at apartments for rent in hot rental markets, where this number could be the deciding factor in a landlord’s decision.

More and more landlords are using detailed credit score checks. They’re examining not just the overall score but also specifics like how much of your credit card limit you’re using, whether you pay your bills on time, and how much debt you’re carrying. As a renter, if you take the time to comb through your credit report before applying for an apartment, you can really set yourself apart.

Plus, with digital transactions becoming more common, even things like your utility bills and streaming service payments could start to influence your credit score. It’s smart to keep an eye on these regular bills because they can show whether you’re good at managing your money.

Credit score essentials for apartment leasing

Now that we’ve covered the importance of credit scores in renting, let’s dive into what makes up a credit score, especially from a landlord’s point of view. Remember, this will be extremely useful in preparing your credit score for rental applications.

1. Payment history (35%): This is the biggest part of your credit score. The payment history now also includes rent payments and utility bills, thanks to newer credit reporting technologies and expanded data sources. Making sure you pay all your bills on time is key to maintain a healthy credit score.
2. Amounts owed (30%): Also known as credit utilization, this part looks at how much of your available credit you’re actually using. The lower this number, the better it is for your score. Thanks to advanced tools for managing balances and tracking your finances in real time, it’s easier to keep this ratio in good shape.
3. Length of credit history (15%): The age of your oldest account and the average age of all your accounts show lenders how seasoned you are at handling credit. So, as Gen Zers start to hit the rental market, the importance of building a solid credit history early on is paramount.
4. Types of credit (10%): This factor takes into account wider ranges of credit types, including digital payment solutions and subscription services, reflecting broader trends in how people are spending their money these days. Having a variety of credit types can really help boost your score.
5. New credit (10%): Inquiries for new credit can temporarily lower your score, because it might look too risky. However, newer scoring models can tell the difference between potential financial distress and shopping for the best rates.

What credit score do landlords require?

It’s important to know that the minimum credit score required for renting apartments can vary significantly from one landlord to another. Moreover, the minimum credit score required for renting is likely influenced by local market conditions and the landlord’s own criteria. So, making sure everything is accurate and clearing up any old debts can bump up your credit score, making you look even better to potential landlords.

According to myFICO, most credit scores range between 300 and 800. Here’s a general breakdown of how credit scores might influence your rental opportunities:

Excellent (800-850 or more): With a credit score in this range, you’ll likely have your pick of rental apartments. Landlords view tenants with excellent credit as highly reliable, often resulting in favorable lease terms and minimal security deposits.

Very Good (740-799): A good credit score opens up a wide range of rental options. You’re seen as a low-risk tenant, which can help you secure leases with reasonable deposit requirements.

Good (670-739): Renters in this range may face more scrutiny. Some landlords might still approve your application, but you could be asked for a higher security deposit or additional references.

Fair (580-669): If your credit score falls in this range, renting can become challenging. This means you will likely need a cosigner, larger deposits, or pre-paid rent to mitigate any potential risks.

Poor (300-579): With a score in this lowest range, your rental options are quite limited. It’s likely you’ll need to look for landlords who don’t require credit checks or find alternative ways to prove financial stability, such as showing a history of savings or that you have a stable job.

As you can see, understanding how credit scores work and how to meet credit score requirements for renting is vital in today’s apartment market. Especially for those new to renting, managing your credit can make the process of finding an apartment much smoother. Remember, a strong credit score not only broadens your rental options but also strengthens your position when negotiating lease terms.