No Credit? Here is How to Rent Your First Apartment

When you graduate from college and get a good job, you’ll probably be looking to rent your first apartment. The only question is, how good is your credit? Did you ever take out a car loan or credit card before? If the answer is no, then you probably have no credit history on your credit report. This will be a problem at most apartment buildings because the landlord depends on credit checks to screen their potential tenants. If they see you have no credit, they are probably not going to approve your application. So, what do you do? Try the following: 1) Provide Proof of Income and List of References References can come from any non-related person who knows you, such as a former supervisor, college professor, manager, etc. If they can vouch for your worthiness, it will make you seem trustworthy. As for proof of income, show the landlord or property manager your pay stub. A bank statement of your available cash balance will also go a long way too. 2) Pay More on the Security Deposit If you pay a bigger security deposit upfront, it might make the property manager feel more confident about accepting your application. This is the best way to win them over when you have no credit history. 3) Have Confidence It is better to have no credit than bad credit. At least with no credit, you have no history of defaulting on debts or making late payments. In fact, you have no history of debt at all. That can benefit you because your landlord will see that you have no other monthly financial obligations. 4) Find Someone to Cosign for You If you can get someone to cosign for you, such as a friend or relative, then it will give the property manager more assurance that everything will work out fine. The person who cosigns will become responsible for your rent if you don't pay it yourself. 5) Get a Roommate If you have no credit, a good solution for renting an apartment is moving into someone else’s apartment and becoming their roommate. Meanwhile, you can split expenses and build up your credit history. Once your credit history is established, you can try renting your own apartment. 6) Locate a Small Privately-Owned Building Sometimes a landlord won't run a credit check on you if they're renting out units in a small apartment building. Either that or they won't care so much about your blank credit history. All you need to do is make a good impression. Some apartment communities will even put "no credit check" in their rental advertisements. Build Your Credit History Quickly No one wants to have a roommate forever. They can be annoying, even more annoying than a spouse. So, you'll want to get your credit score up fast. The good news is that your credit score can increase after only 6 months. As long as you signed your name on the lease too, then your credit score will increase at the end of the lease's term limit. It is best to sign a short 6-month lease when getting a roommate. You don’t want to commit for any longer than that. Go see what your credit score is right now. You can get a free report at annualcreditreport.com. The website is 100% free, unlike those other credit report sites that want to charge you lots of money on your credit card. If you have no credit history at all, you’ll want your score to be somewhere between 750 and 850. This is considered to be excellent. A lot of apartment communities only expect applicants to have 600 or higher. Secured Credit Card If you cannot get a standard credit card due to having no credit history, then try applying for a secured credit card instead. The bank will require you to pay money upfront as collateral for the card. It is usually a small amount like $500. Once you do that, the bank will issue you the secured credit card and set your credit limit to $500 (the same amount you paid). There are many options available for secured credit cards. Be aware that annual fees or application fees may be charged on certain cards. These fees will wipe out that $500 credit limit very quickly. At the very least, check to see if the bank or issuer reports to each of the three biggest credit bureaus. These would be Experian, TransUnion, and Equifax. Only keep the secured credit card long enough to build your credit history a little bit. And, of course, pay the credit card balance off each month. Credit-Building Loan One alternative to a secured credit card is a special loan designed for building credit. A credit-building loan is meant for people with no credit history. You can usually get one that has a low monthly payment and a term of no more than 2 years. If you find such a loan, apply for it immediately. A savings account will be set up and the money will be deposited into it. However, you must pay the loan off first before you can gain access to the money. Just make your monthly payments on time, and you’ll have better credit and all your cash back at the very end. Car Loan Even if you need to find a cosigner, a car loan will boost your credit profile considerably. Just make your payments on time each month. Besides, you are probably due for an upgrade anyway. Make Payments on Your Student Loans Did you pay for college with a student loan? That kind of debt can actually benefit you once you start making payments on it. Your credit score will increase with each payment that you make. Again, pay on time and never be late. Otherwise, your credit score will suffer for it. Monitor Your Credit Report When you’re trying to build your credit history, you need to maintain low credit card balances. If you can pay them off each month, that is even better. Keeping an open credit line will enhance your utilization ratio. This is the amount of available credit versus the amount you’ve used. So, if your credit card has a $1,000 credit limit and you have already spent $500 of it, the utilization ratio is 50%. The lower your credit ratio is, the better it looks for your credit because it means you’re not spending much of your available credit. That shows lenders that you’re responsible. You'll want the utilization ratio to stay at about 6% or less. Credit cards are the only kind of loan which has a utilization ratio. If you apply for other types of installment loans, such as car loans, then the debt-to-income ratio will be applied. If you want to calculate this debt-to-income ratio, take the amount of debt you have on the loan and divide it by your total gross income per month. For instance, if your monthly income is $3,000 and your monthly debt is $1,500, then your debt-to-income ratio is 50%. Your credit score won’t be affected by this. Remember that income doesn’t affect your credit score. But you’ll want to know your debt-to-income ratio before applying for a loan. If the ratio is low, you have a better chance of getting approved for the loan. In conclusion, your main goal should be to establish your credit history. You can open a secured credit card account to get started. You can also pay off a student loan or car loan. A mixture of the two will work great as well. Just be careful because you don’t want to have too much debt that you cannot handle. It is never good to have multiple credit cards at once. And if you get a loan, make sure you can handle the monthly payments. Otherwise, a late monthly payment will ruin your credit score rather than make it better. You need to have a suitable ratio between your amount of income and amount of debt. Follow this advice and you’ll have your first apartment before you know it.