Having a credit score that isn’t within the excellent range (above 720, depending on the scoring model) may be an issue, especially if you’re looking to rent in a big city. Competition for apartments in desirable markets is fierce and you’ll likely be passed up if your credit score is low, as landlords usually require a good credit score from tenants.
It won’t matter that you have a stable income and filled out the application first. There will be other potential tenants who are also gainfully employed but also have a better credit score than you, which will give them an edge when the landlord is looking over applications.
The following factors are considered when calculating your FICO credit score:
- How long you’ve had credit (payment history)
- Credit utilization (how much credit you’ve used vs. your overall credit limits)
- How much new credit you have
- What types of credit you have
You should really only focus on the first two factors when improving your score. However, it’s best not to open any new credit cards during this time (referring to number three), as hard credit inquiries can ding (and lower) your score.
Here are the five ways to improve your credit score.
1. Pay your bills on time
According to FICO credit score calculations, paying your bills on time (payment history) accounts for 35 percent of your score. This means you should never ever make a late payment — ever.
2. Pay off your debt
Your credit utilization is the amount of debt you have in relation to your credit limits. In order to get this percentage, you divide your total amount of debt to the total amount of credit.
For example, if you have $2,000 worth of credit card debt and a $10,000 credit limit, your credit utilization is 20 percent. Experts recommend you keep this in the one to 10 percent range.
If you can’t afford to pay off your debt completely, start paying more than the minimum balance. Paying off your debt improves your credit utilization.
3. Become an authorized user on someone else’s credit card
Ask your family member or close friend for help and ask to be added as an authorized user on their credit card. Getting added as an authorized user to their account (as long as they have good credit) is an easy way to ride their “good credit coattails.”
Make sure you do this with someone who’s responsible with their credit, since their credit will ultimately affect yours. This is why it’s especially important that both parties trust each other and understand how to responsibly use credit.
4. Open a secured card
If you’re dealing with a really low score (below 600), consider opening a secured card. This can help you build credit, as long as you make on-time payments.
Make sure that the secured card issuer reports to all three credit bureaus (TransUnions, Experian and Equifax). Also, keep in mind that a secured card takes cash collateral from you, meaning you have to front the cash as your credit line.
5. Include rental payments in your credit score
If you’re not in a rush to move, ask your current landlord if he or she would report your on-time rent payments to the credit agencies. There are a number of ways to do this, including through your landlord (most ideal) and by paying to use a rent reporting service.
Improving your credit takes time
Whatever moves you decide to make first, be sure to stay consistent and monitor your credit at least once a month. Most likely, your bank or credit card offers this to you for free. Or you can use a free credit monitoring service like Credit Sesame or Credit Karma.
Regardless of whether you’re in a competitive market, raising your credit score can give you an edge when renting an apartment. At the very least, it’ll put you on par with other renters so you can stay in the running for that perfect apartment you’ve been dreaming about.