Your credit score is one of many things that a potential landlord may consider when you apply for an apartment. While poor credit can present a hurdle, there’s no reason you can’t leap it confidently with a letter explaining your situation. Learn more about what to include and use the sample letter included to get started.
What do landlords check?
Landlords often check prospective renters’ credit scores or credit reports to see what kind of financial risk they’re taking with the individual. Your credit report shows:
- The types of accounts you have, such as credit cards, student loans, and vehicle loans
- Credit limits on your accounts
- Outstanding balances
- Payment history
- Minimum payment amounts on outstanding debts
- Inquiries made into your credit
- Bankruptcies
- Foreclosures and short sales
- Past-due accounts that belong to collection agencies
These factors all contribute to your credit score. Your credit score is a three-digit number that typically falls between 300 and 850. Different landlords will have different criteria regarding credit scores. However, a score between 670 to 739 is usually considered “good” while a score between 580 and 669 is “fair”. If your credit score is below 580, you may find it more difficult to secure an apartment.
Keep in mind, though, that different scoring models use different numbers to constitute the ranges. Before having your credit score obtained for a rental, consider asking the landlord or management company which model they’re using.
A poor credit score and red flags on your credit report may seem to indicate that you have trouble meeting your financial obligations, often submit late rent and credit card payments, and carry more debt than you can afford. This can make a landlord hesitant to take you on as a tenant, but it doesn’t have to mean that hope is lost.
How a Letter of Credit for Rent Helps
A letter of credit for rent is simply a letter explaining the state of your credit report. You may hear the term “letter of credit” used in reference to commercial properties where a renter may get backing from a financial institution to help them secure a lease. This isn’t the letter of credit we’re talking about.
If you have bad credit, there’s no point denying it to a landlord who’s running a credit check. It’s better to face the issue head-on. This gives you the opportunity to explain your situation and provide evidence that you’re actively working to repair your credit score. If you know that a potential landlord will check your credit, include a letter of explanation with your rental application so you can get ahead of this issue.
How to Write a Letter Explaining Bad Credit
Before you can write a detailed letter explaining your credit situation, you need to understand it thoroughly. Request a copy of your credit report from one of the three credit reporting agencies: TransUnion, Equifax, or Experian. You are entitled to one free copy from each per year. When you’re actively working on your credit, it can help to space these out and review one report every four months so you always have an eye on the situation.
Review your credit report for red flags that will stand out to your prospective landlord, such as:
- Missed payments
- Accounts submitted to collection agencies
- High balances
You should address these warning signs openly in your letter and provide an honest explanation. Many landlords are sympathetic to tenants who have had a difficult history as long as they’re committed to making positive changes in the future. As you explain the situation surrounding late or missed payments, you should also explain how you plan to prevent these in the future.
Sample Letter: Explaining Bad Credit to a Landlord
The following is a sample letter explaining bad credit to a landlord. You can use this as a general template for your own letter.
Dear [Landlord]:
I recently toured [apartment complex] on [date] and was very impressed with the community. You have an ideal location near my place of work and outstanding amenities, such as the playground, that I know my children would enjoy. I am submitting an application for a [#]-bedroom unit in your complex. I understand that you run a credit check as part of the application process and I would like to provide some additional information on my credit history.
As you will see, I struggled with late payments from [month] to [month] in [year]. I dealt with financial hardships during that time due to [explain your reasons, such as being laid off, having unexpected medical expenses, etc.]. I have since [explain your resolution, such as securing a good job, setting up a payment plan for your medical bills, etc.].
I am working hard to repair my credit and have created a budget for my family, which will help me stay on top of these bills as well as my rent payments and other expenses. A copy of this budget and my proof of income are attached. I have also included the last three months of bank statements showing my monthly income and expenses.
I can also provide you with:
- [Detail other documents or provisions that you are willing to make]
Despite my prior credit history, I believe that I would make an excellent tenant in the [location] community. If you have any other questions or concerns, you can reach me at [phone number] or [email]. Thank you for your consideration.
Sincerely,
[Your Name]
Tips for Finding an Apartment With Bad Credit
If you’re able to make additional provisions to compensate for your bad credit, this may increase your chances of securing an apartment with a low credit score. Some things you may offer include:
- A cosigner with good credit
- First and last month’s rent upfront
- A larger deposit
- Larger monthly payments
- Automatic payments
Don’t let a poor credit history discourage you from seeking a great apartment. Take a proactive approach to this tricky situation and you may impress your landlord with your honesty, openness, and commitment to taking charge of the situation.
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