Credit Backgrounds and Rental Application Rejection: What You Can Do to Change It
After breaking up with my significant other of five years, I decided it was time for me to get my own place. I applied for several apartments in an area that was close to my job. I dotted my eyes, crossed my tees, making sure to provide them with all the information they needed to approve my application.
Fast forward three days and I get a call from three potential landlords, all stating that my application had been rejected as a result of my credit background check. Really? I had no idea how much my credit rating would affect my ability to rent an apartment. After all, it’s not like I was trying to get a home loan or anything?
So what exactly was wrong with my report that caused three different landlords to decline my application?
- Too Much Debt: Debt to Income Ratio
How much money you have coming in versus how much money you will have going out equals your debt to income ratio. Many applicants don’t worry about this, because essentially, they’re going to pay money to the accounts that matter most…. Right? If you have to pay your electric bill or a past due credit card balance, chances are you’re going to keep the lights on…. However, to a potential landlord, this is a red flag. If you’re not able to afford the debts you currently have, how are you going to afford the rent in a timely fashion?
Solution: Most people can’t simply snap their fingers and start earning more money to improve their debt to income ratio, so finding other ways to improve your credit score is beneficial. It is ideal to try and get as many of your credit accounts resolved as possible. Setting up payment arrangements and making timely payments can free up some extra funds over a given period of time.
- Too Many Negative Accounts
Another common reason that applicants are rejected for an apartment is the result of too many negative accounts. Negative accounts essentially tell landlords that you do not have good money management skills. You’ve allowed small amounts of credit to pile up to the point that they’ve reached collections, which is never a good thing. Landlords are in the business of turning a profit, and a tenant that cannot pay a $300 credit card bill off may not be able to pay off $1000 a month rent.
Solution: If you haven’t paid off the negative accounts, it is ideal to go ahead and set up settlements and payment arrangements. On the other hand, if negative accounts have been paid off and are still showing negative, you may want to consider credit repair services to resolve the matter. Be sure to check reviews such as legal credit repair Lexington Law reviews to see how they’ve benefited other people in your position.
- Poor Rental History
Let me just start by saying, I had no idea that your rental history was reported on your credit report, however, after reviewing mine carefully, I saw that landlord from 5 years ago (first apartment after college) posted about the outstanding rent I owed. It turns out that landlords looking to obtain funds from you CAN report this to the credit bureaus. During those times things just got rough. I was in college, working part time, and probably should have stayed a home with my parents. Desperate to be independent I mismanaged funds and ended up evicted for nonpayment of rent. While the rent owed was only about $300, it was enough for new landlords to reject my application.
Solution: The best thing that you can do about poor rental history on your credit report is to pay the debt that is owed. Contact your previous landlord and set up a payment arrangement that will allow you to settle the debt. Chances are they will be more than willing to work with you as long as you’re not trying to pay them back $10 at a time. Once the outstanding balance had been paid in full, I requested a receipt showing the balance had been paid in full, and also asked my landlord for a character letter. I wanted to show that while I fell on hard times, I was otherwise a great tenant. I then used this letter and a copy of the receipt when filling out applications for a new rental unit.
By following the above advice, applicants should begin to see an improvement in their credit history over the next three to six months. At this point, reapplying should be easy and approvals are more likely. It worked for me… after six months of timely payments and removing old negative accounts from my credit report; I applied with the same landlords and essentially got approved for an apartment in the area I wanted to move to the most.
About the Author
Sara Stringer is freelance writer who enjoys writing about natural health alternatives. In her spare time, she enjoys maintaining an active lifestyle through swimming and practicing yoga.