What is the state of your credit score? If you’re thinking, “What credit?” let’s take a break from your quest to mature and go over it again. Did you have a credit card while you were a college student? No? Were you in possession of a vehicle loan? No way… hmm. Because most apartments need a credit check, yours will most likely be a big fat zero – zip. Nada. There was no credit given. So, how do you rent an apartment if you don’t have any credit? Here are a few examples:
1. Bring references and evidence of income with you.
Can a college professor attest to your character? Maybe your previous internship’s supervisor? Use whatever you have on hand to demonstrate your reliability. Bring a pay stub with you if you have one. A bank statement may also be useful if you have money in the bank.
2. Propose a higher security deposit.
A higher security deposit or extra months’ rent in advance may allay an apartment manager’s fears about renting to someone with no credit history.
3. Have faith!
While having excellent credit is desirable, having no credit is preferable to having poor credit. You’re essentially a blank slate! You don’t have any debt, so use that to your advantage by explaining to the landlord that your rent will be your sole monthly payment.
4. Get a cosigner
Getting a cosigner is a guaranteed method to obtain that apartment if a parent, family, or friend is ready to assist. Just be aware that if you are unable to pay your rent for whatever reason, your cosigner will be held liable.
5. Find a credit-worthy roommate.
Okay, having a roommate may seem a bit “college dorm,” but it’s a temporary option while you establish a credit history. Consider how much money you might save by sharing the rent! You may be able to afford certain luxury apartment features.
6. Look for a smaller, privately owned building.
A landlord who runs a small apartment complex may not conduct a credit check, or he or she may be prepared to overlook your lack of credit if they believe you are trustworthy. Look for apartment complexes that offer “no credit check.”
Ways to Improve Your Credit Score Quickly
You don’t want to spend the rest of your life with your roommate (let’s call him David). He never washes his coffee cup or removes the cap from his toothpaste. I understand how inconvenient it is. So let’s get you back on track to excellent credit as soon as possible. You might have a fantastic FICO score in only six months! If you signed a short-term lease, you may find yourself saying goodbye to David before you realize it. Here’s how to properly build credit:
- Determine your current location and your desired destination.
Are you certain you have no credit? It’s recommended to visit annualcreditreport.com to find out where you stand. (This is a government-mandated, totally free website.) Be wary of any website that wants you to pay for your credit report or requests for your credit card information.)
- Aim for the stars!
If your credit is really non-existent, you should strive for a score of 750-850. This is “excellent.” Most apartment complexes need a credit score of 600 or higher.
- Submit an application for a secured credit card.
A secured credit card is excellent for anybody who is unable to get a standard credit card due to the “no credit” issue. A protected credit card operates as follows: You hand over a certain sum of cash to the bank – let’s say $500. In exchange, the bank issues you a credit card with a limit of $500. Consider your choices carefully – some banks may impose an application fee or an annual fee. Avoid them, since they will rapidly deplete the $500. Ascertain that the secured credit card issuer reports to each of the three main credit agencies (TransUnion, Equifax, and Experian). Additionally, do not retain this card longer than necessary, and be sure to pay it off each month (do not carry a balance).
- Consider a loan to help you improve your credit.
If you don’t want a secured credit card, consider obtaining a credit-builder loan. These loans are intended especially for individuals who do not have credit. Look for one with a low, reasonable monthly payment and a shorter period of 24 months or less. Fill out the loan application. Typically, the money is put into a savings account and cannot be accessed until the loan is paid off. You’ll walk away with both cash and credit if you pay on time every month!
- Obtain a vehicle loan.
Sure, you’ll almost certainly need a cosigner, but as long as you pay on time every month, this is a fantastic method to establish credit. And if you’re still driving that old hand-me-down with the torn seats and corroded floor, it’s time to update.
- Begin repaying your college debts!
Did you take out one or two student loans to help pay for college? That debt might be useful! Begin making payments on them and see your credit score rise as your student loan debt decreases. Make sure you pay your debts on time – if you are late or default on your payments, your credit score will suffer.
Begin keeping track of your credit.
While building your credit, there are a few things to keep an eye out for. Your credit card balances should be kept as low as possible, if not fully paid off. If you have an open line of credit, you will increase your usage ratio, which is the amount of credit you have compared to how much you utilize. If you have a $500 credit limit on a card and you owe $250, your credit ratio is 50%. A low credit ratio indicates that you utilize less of your available credit, implying that you are responsible with credit and capable of managing it. Maintain a credit ratio of about 6% – or, in this instance, less than $30.
Remember that the credit card usage ratio only applies to credit cards. The debt-to-income ratio, which is used for car loans and other installment loans, is a distinct rate. Divide your debt (credit cards, vehicle loans, other loans) by your gross monthly income to get your debt-to-income ratio (or DTI). So, if you earn $2,000 each month and debt $1,000 per month, your DTI is 50%. This number doesn’t impact your credit score (your income isn’t a factor in your score), but it’s good to know if you ever want to apply for a loan – the lower this ratio is, the better.
To summarize, you want to build credit. Open a credit card (but use it carefully) or begin repaying a loan to do this. Perhaps a combination of the two. However, if you open too many credit cards or take out a loan with an unsustainable monthly payment, you risk being late and damaging your growing credit score. Think Zen when it comes to finding a good, comfortable balance between income and debt. Serenity. Pose like a tree. Whatever.
That’s it – the road to renting your first apartment and building credit. Check and double-check! Now, let’s go back to the adulting quest! Does it seem so impossible anymore? Contact us for a free consultation if you need any credit repair assistance from a reputable credit repair company.