Signing the lease to your first apartment is a lot like initiation into adulthood for many young people. But a roadblock in completing this rite of passage for recent graduates, or those starting a career is a limited, or non-existent credit history.
Landlords will push for a cosigner as an easy route around this roadblock, but what if you don’t have anyone willing to cosign? And, while a cosigner is a legitimate option, having a family member or close friend co-sign pushes your journey into adulthood aside and a potential jumpstart to your credit profile on hold.
If you’re ready to take on adulthood, a thin credit file will not convince many landlords about your ability to pay rent, and if you have nothing to show for employment history, or on-time payment history with creditors, your credit report won’t be a strength in your rental resume.
But there’s good news – how you qualify as an applicant is entirely up to a landlord’s judgment, and proving you’ll be a reliable tenant is possible even if you’re credit invisible to the major bureaus (meaning you don’t have credit history). Remember that landlords might prefer someone with a clean slate over someone who neglected their finances in the past, but there’s still some legwork involved to rent with a poor credit history.
Here are 6 tips for renting with little or no credit history:
- Start building your credit. Before you’re tempted to begin looking at apartments, think about ways to jumpstart your credit profile. You might be able to squeeze by renting without a credit history, but in the long run, building credit will be important for more than just landing an apartment. If you’re looking for ways to raise your credit instantly, you’re unfortunately not going to find one. But there’s no better time than the present to get a jump on building your profile.According to Experian, for your credit file to become visible, three to six months of regular credit activity is required. For safe and easy ways to start out, consider common credit-building products such as secured credit cards, credit builder loans, and retail store credit cards to get the ball rolling. These options usually don’t require a strong credit history, or require a deposit upon applying.
- Consider owner-rented apartments. You’ll stand the best chance renting from someone who is not a stickler about a strong credit history. These are usually the “mom and pop” kind of landlords, who are looking for a trustworthy person with a steady job to rent out the backyard unit. Avoid looking at multi-family apartments, or those with a front office determined to weed out “unreliable” tenants from renting. But still be ready to prove you have steady income and money in the bank ready for first and last month’s rent (and don’t forget about the security deposit).
- Be transparent about your finances. Since your credit report is likely not your strong suit, you’re going to need to prove you can pay rent. If you’re credit invisible but have a job and earn a livable wage, this will put your application ahead of someone with bad credit. Show proof of income through pay stubs, bank statements, or any kind of savings accounts that you might have.
- Be prepared to pay more in advance. Similarly, a down payment when choosing to buy a home is one of the most crucial aspects of an offer. The same goes for renting — if you found a place that you really like, but the landlord is a bit skeptical about your credit, an effective way to sweeten the deal is to pay an extra month or two of rent ahead of time. They’ll appreciate the large deposit of cash in their pocket, and know that you’re serious about living there.
- Consider a roommate or two. If you’re a recent graduate, and moving out of the house, you’ll more than likely have friends or easily find roommates online with decent credit. If you join forces with one or several roommates (depending on the number of bedrooms and what the landlord is comfortable with), not only will rent be cheaper but this route will give you a chance to build your credit.
- Have a backup plan. The reality is that the odds are not in your favor renting with a thin credit file, and especially in a competitive rental market like San Francisco, CA. This is why a backup plan is crucial before attempting to find your own place. If you have family offering you somewhere to live for cheap or even free, choosing to move back home for a bit is a great idea. This will give you a chance to save money and straighten out your finances.