If you’re looking for a new place to live, you’re probably already thinking about how much rent you can afford each month. Other financial criteria, though, can influence whether you are accepted for a new rental property. Though everything from your assets to your salary can affect your eligibility, today we’ll address a frequently asked question: Do I need a credit score to rent an apartment?

Yes, in many major apartment complexes and residences managed by a property management company. This is one of the variables used to evaluate if you will be chosen to rent a desirable home or apartment. Property owners that only rent out a few properties may use credit ratings to reduce risk and discover the most trustworthy tenants.

If you’re a first-time tenant, this score is even more important because you won’t have a large record of former landlords or property managers who can attest to your ability to pay monthly rent and utilities on time.

What information does a credit score reveal to property managers?

You may be wondering why a credit score is important if you are not planning to take out a loan to pay for your apartment. Renting is a legal agreement between you (the resident) and the property manager or landlord. The owner assumes a lot of risk if you move in. They must guarantee that you will:

• Pay your rent on time
• Keep the property in good condition (and don’t break anything that will be expensive to fix)
• Make all required utility payments on time

All of these difficulties could result in huge expenditures for the property owner, therefore they are looking for assurances from prospective renters.

Most landlords will conduct a “hard pull” on your credit report in addition to reviewing your previous rental history and proof of income or employment. This gives them access to up to seven years of credit history as well as your current credit score.

They can immediately determine if you have ever missed payments or have excessive debt. Most owners or property managers have a minimum credit score that they will require, although this varies depending on location and the type of building you would be living in. It could be as low as 500 in certain cities and as high as 750 in others. This is totally at the discretion of the property owner. In general, a credit score in the low- to mid-600s should be sufficient to get you approved.

Many landlords use credit as a filter.

The score is also a simple criterion for sorting through numerous applications for the same property. The owner will frequently begin with individuals who have the best credit.

In general, the greater your proposed rental payment, the higher your credit score must be. If you’ve been paying your credit cards or auto payments on time each month, a landlord will assume you’ll be able to manage your rent payment.

Now, if you don’t have excellent credit, you can still secure an apartment, but you’ll have to go above and beyond to show your possible landlord that you can pay your rent on time.

If you’re moving in with someone else, keep in mind that their credit will be considered during the application process as well. While you have good credit, their poor credit may prevent you from being accepted. However, if you have a strong credit score and they have a decent credit score, your chances improve.

Does paying rent help you establish credit?

That’s a tricky question. Unfortunately, in most circumstances, the answer is ‘no.’ Despite the fact that you are making consistent on-time payments, the majority of property managers and owners do not disclose this information to a credit bureau. Only 10% of Americans now build credit by making on-time rent payments.

However, there are companies like Esusu that feel that timely rent payment should be rewarded. After all, whether you rent or own, many years of careful housing payments should demonstrate creditworthiness. Esusu was created to provide everyone with equal financial access. For many people in the United States today, their credit score, or lack thereof, is a barrier to financial security.

More than 45 million Americans are classified as “credit invisible,” which means they have no reported history with one of the three major credit reporting agencies (Equifax, Experian, or Transunion).

The Esusu platform delivers rent reporting, comprehensive property management analytics, and rental help, allowing renters and property owners alike to gain financial access and security. Click HERE and learn more about Esusu.

Because making a direct payment for rent is not based on a loan reported back to the credit bureaus, this practice is not (yet) prevalent. When a home is purchased with a home loan (or mortgage), the credit bureaus are notified, and the payment is recorded.

For the time being, if your property manager has not yet joined Esusu, the best method to leverage years of consistent rent payments is to use former rental experiences as references for future rental applications.

Will my credit score suffer if I fail to pay my rent?

If you get behind or start skipping payments, your property owner or manager will usually start by giving you a notice and assisting you in developing a repayment plan. Missed payments will not appear on your credit report at first. (Also, rent reporting mechanisms like Esusu exclusively report on-time payments, never missed or late ones.)

If you are evicted for persistent late payments, you may be subject to collections. When your delinquent account is sent to collections, a negative item will appear on your credit report, lowering your credit score. So, if you’re worried about skipping a payment, talk to your property management about setting up a payment plan.

Credit and future home ownership.

Even if your rent isn’t improving your credit score, on-time payments are starting to be acknowledged when applying for a mortgage. Fannie Mae and Freddie Mac, the nation’s leading mortgage lenders, each declared that they would include on-time rent payments as a success factor when reviewing mortgage applications from first-time home buyers.

A Parting Word from Jerome…

You like your present house, but you want your on-time payments to go toward your credit score? Talk to your landlord about joining up for a rent reporting service like Esusu, which can provide you with the benefits of credit-building at no cost.

In the end, having a good credit score will help you in many areas of your life, including finding your future house. Applying for an apartment may be a life-changing experience, and you don’t want a bad credit score to ruin it.