When you want to rent a place, the housing management will check your credit history and credit score. Your history shows when you’ve owed money in the past, including credit cards, bank loans, phone bills, and other expenses, and how promptly you paid them.

Your credit score is a measure of how well you pay your bills—it takes your credit history and makes it into a number. If you don’t pay your bills on time, don’t make the minimum payments, have too much debt, or go over your credit limit, your score will go down. Your credit score is very important to landlords because it helps them decide if you would pay your rent on time.

If your credit score is low, your application could be rejected. Your score might be low because you simply do not have much credit history (you haven’t taken out many loans and don’t have credit cards), or because you have a poor credit history (you took out loans and did not repay them).

Lack of Credit History

One problem you might have is a lack of credit history. This means that you haven’t taken out loans or used a credit card in the past. When credit agencies decide if they think you will pay back loans you get, they will not know because you’ve never taken out loans before. This means they will give you a lower credit score.

Here are some ideas that might help when you are applying for an apartment:

• Have a co-signer on your lease. This means another person signs your lease and agrees to also be responsible for making sure your rent gets paid. (Make sure the other person has a good credit history and score.)
• Use a lease guarantee service. This means you pay a company some money, and the company agrees to pay your landlord if you fall behind on rent. You might do this if you cannot find a co-signer for your lease.
  • Example: Beyond Backgrounds Financial Assurance for Rental Properties is a service where you pay some money and they agree to pay the landlord extra money if there are problems later in the rental.

You should also try to start creating a credit history. For example, try to get a credit card and use it sometimes. Of course, you must then pay your credit card on time every month! Get more ideas from the Consumer Financial Protection Bureau’s guide to building credit from scratch.

Poor Credit History

A poor credit history means you got credit cards or loans in the past and didn’t pay them off on time, or at all. This will lead to a low credit score and will cause landlords to think that you won’t pay your rent on time. Landlords are allowed to reject apartment applications of people who have poor credit histories.

If you’re applying for housing, you can use some of the same strategies as if you didn’t have a credit history, like offering a higher security deposit, getting a co-signer for your lease, or using a lease guarantee service.

However, you also need to start improving your credit. To get started, find an organization that offers credit counseling, but choose carefully. Some credit counseling agencies take advantage of people for their own profit. The Consumer Financial Protection Bureau explains what credit counseling is (including how to choose a counselor) and lets you check out nonprofit credit counseling agencies.

Credit Resources

Here are some resources that can help you understand and manage your credit history and score:

• A few Minnesota nonprofits that help you plan for dealing with debt and other money issues include :
  • LSS Financial Counseling
  • Consumer Credit of Minnesota, and
  • FamilyMeans Financial Solutions.
• Hands on Banking explains how to build credit, maintain it, and repair it.
• MyCreditUnion.gov has tips for choosing, using, and managing credit cards.
• Practical Money Skills offers a series of articles on understanding credit.
• The World Institute on Disability has an interactive online course on credit (free account registration required).