7 Ways To Deal With Bad Credit When Renting

house for rent bham al
Renting a home with bad credit

Bad credit can trigger all sorts of issues when trying to get a mortgage, purchase a car or get a credit card.  But even if you’re just looking for an apartment or house to rent, your credit history can pose problems.

Most landlords check credit reports of potential renters to determine the probability of receiving the rent payments.  This can pose a problem when you may have a repossession, charge-offs, foreclosure, late payments or a Bankruptcy listed on your credit report.  When your credit is damaged, you may have a tough time qualifying for that home or apartment that you and your family need.

At reScore Solutions, we understand that many people have fallen on hard times due to job loss, health problems, or having to close a business.  Bad credit can happen even when we do our best to pay our bills on time.

Call us so for a free no-obligation credit report evaluation.  While you are trying to get your life back on track, we can get your credit scores back up and running.

We specialize in getting your credit reports lender-ready so that you will be approved for a home.   Understanding the ins and outs of lending we know what it takes to get your credit reports repaired and credit scores to the specification of your lender.

credit_report
Raise your credit scores to qualify for loans and credit cards.

What should you do if your credit history is less-than-stellar? Here are seven ways you can overcome your bad credit and still get that rental you’re looking for:

     1.  Be honest and show that you  have been making progress.  

Sometimes bad credit isn’t a reflection of poor money management.  Be upfront with a potential landlord before your credit is pulled.  Don’t make excuses and blame others. Landlords have heard all of the blame games.  If you are able to show a valid reason why your bills were not paid on time, such as divorce, health, job loss; but also show that it was a temporary situation and show how you have been able to get back on your financial feet, you may have a better chance of getting approved.

     2.  Find a guarantor or co-signer     

Ask a trusted friend or relative with good credit to co-sign the rental application with you.  While you may be the only one living in the home or apartment, your co-signer will be financially responsible if you do not pay your rent.  This may give the potential landlord the extra security that he needs to feel comfortable with renting to you.

Of course, you really don’t want your co-signer having to pay your rent, so be sure that you not over obligate yourself to a rent amount that you can’t comfortably afford.

rental agreement
Co-signer for rental agreement

     3.  Pay in advance or increase your security deposit

Bad credit and especially a consistent bad credit history makes a landlord nervous because it indicates that your actions in the past may be repeated, such as defaulting on the rent payments or not paying on time.  By paying a month or more in advance or offering a two-month security deposit, you can possibly alleviate their concerns. Not only does this show your commitment, it also provides them with extra cash that can cover some of the losses and damages, should you skip out on the rent. (Which, of course, you won’t.)

     4.  Get a roommate

Willing to share your space such as kitchen, living room?  If so, a roommate may be a great solution.  If the landlord will allow just one person to sign the lease, see if your roommate is willing to sign it solo. (Alternately, try to move-in with a roommate who’s mid-lease.) This way, the person on the lease is the one with more solid credit.

The other benefit to having a roommate is sharing the utilities.  Saving money will help you to pay down your debts and helping to repair your credit.

     5.  Show solid income and offer to pay via direct deposit

Even if your credit is a little weak, your landlord may feel better if you can show that you have history with a full-time job with good pay.

When applying for an apartment, have proof of income ready, such as recent pay stubs, tax returns and a letter from your employer verifying your employment status and income. Offering to have your rent automatically deducted from your bank account can also help.

     6.  Be willing to pay a little more

Some landlords, even if you are renting from a property management company may charge additional “risk” fees for shaky credit and poor credit scores.  You may want to step up and pay more if you really love the home or have to move in a hurry.

If you are dealing with an individual, you may want to negotiate to pay a higher amount so that your application is not denied.

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Lower credit scores mean higher interest and rental payments.

     7.  Letters of recommendation

Just as your would provide a letter of recommendation for a job, provide one for a potential landlord too.  Ask for letters from current and previous employers, current and previous landlords, and even past roommates who can vouch for your character. Even if your previous landlords were only for short-term arrangements, their endorsement can hold weight.

Children, Chores & Allowance

We love our children, and of course we want them to have all that they need…and much that they really don’t need.  Do you find yourself at the crossroads of another meltdown with your child at the checkout because of something that they have eyed and can’t live without?  Of course you have!  We all have!  But there may be help in teaching them to curb these emotional attachments for things that they won’t remember five minutes after they arrive home.

Teach children money management.
Children and money.

Get creative and help your children earn money and teach good money management, which in return will help them to make wiser purchases.

Help make earning money fun.  The following Here is a list of chores your young child can accomplish with minimal help:

  • Picking up toys
  • Feeding the family pet
  • Collecting household garbage/ recycling to be taken out by adult
  • Setting the dinner table
  • Sweeping
  • Cleaning toilets
  • Tidying their bedroom

Pitfalls when it comes to chores.

  • Don’t insist on perfection.
    • Your child is not in the military.  They are children and still learning.  Challenge children to excel, but don’t scold.
  • Don’t delay.
    • You may think that your child is too young. They may be more capable than you think.
  • Don’t be stingy with praise.
    • Get that praise going right away! Don’t wait until the chore is done. Praise and encourage the child while the chore is in progress. You want to build positive momentum, especially with young kids.
  • Don’t be inconsistent.
    • Be regular and don’t allow for putting off for another day.

HAVE A PAY CHART

Have a chart posted where your child can visible see it so that they see how much they earn with each job.  Pay weekly and help your child to spend the money on items that they have made a list of.  This will assist in keeping them focused instead of spending on impulsive items.

 

Surefire ways to get denied for a home loan

Surefire ways to create money and credit problems.  If you plan to get denied for a loan or mortgage the following plan will work great for you.

1.  Go ahead, charge those clothes, shoes and stuff that you can’t afford.  After all, you worked hard all week and you deserve it, but you’re a little short on cash.  You are short on cash every week but it’s such a good deal, and it’s only a total of $126.52.  After all, you can pay that back in 6 months, well unless you use the card again for the unforseen medical bill of $225.  There is no savings to fall back on.  Now your card is up to $351.52, oh and the two late fees of $35.  Guess that’s now $421.52.   shopping for clothes

Maybe when you get you income tax refund you can pay off the credit card.  Maybe?  Had you not purchased the clothes and worked out and interest free repayment plan with the medical bill, this debt could have been avoided.

2.  Don’t shop around and pay full price whenever possible. Internet price shopping can save lots of $$$, but why bother.  You want it now!

3.  Transfer balances to 0% rate credit cards, then make the minimum payment.

4.  Add balances that exceed apx 19% of your limit to credit cards.

5.  Apply frequently for new credit.

6.  Deal with finances….hmmmm…tomorrow.

7.  Use Payday loans for emergency money. This is a cycle that is most difficult to break.  terms and prepayment options

8.  Pay credit cards with home equity.  It’s best to work out a repayment plan to pay off credit cards and don’t attach your home’s equity.

9.  Don’t save money after paying bills.

10.  Get financial advice from friends.

Obtaining a mortgage loan with poor credit.

Do you have poor or weak credit but would like to purchase a home?  You may have been told that it’s not possible. You may have applied for credit and was denied and now you are convinced that obtaining a mortgage loan is not possible.  Well, it may be more possible than you think..  Of course your credit will need some attention. Kirkpatrick & Associates specializes in getting our clients lender-ready, but of course we will work with clients for most any purpose.

A lender qualifies a borrower based on a credit history and credit scores.  There are three major credit reporting agencies; Experian, Equifax and TransUnion.  You score ranges roughly between 500 and 850.  Lenders most often receive FICO scores, which are not the same scores or based on the same scoring models as the scores a person purchases or receives from the credit reporting agencies.  I recommend FICO.com to obtain the same scores that lenders get.  There are three scoring models for FICO scores.  Mortgage, revolving credit and auto loans.  They provide all three scoring models.

Bad credit loans
Home Sweet Home

 

EDUCATIONAL LOANS:  Once educational loans are being paid current it is possible to qualify for a mortgage, even if delinquent payments are being reported from the past.

CREDIT CARDS:  These payments need to be current and no late payments in the past 12 months.  Some lenders will allow a letter from consumer, explaining late credit card payments.  Credit cards balances need to be paid to below 19% of the credit limit.  IE:  $1,000 limit should have a balance of $190 or less.  Paying credit cards down will improve credit scores.

BANKRUPTCY:  A consumer can technically qualify for a mortgage two years after a bankruptcy.  3 years if the Bankruptcy included a foreclosure.  Do keep in mind that credit has to be rebuilt during this time period.

LIENS AND JUDGMENTS:  These must be paid and showing satisfied with all credit reporting agencies that are reporting these on your credit reports.  Just because they are paid doesn’t mean they are reporting paid.  If this is an issue, this is a service that we can assist you with.  Call us at 205-352-3448

CHARGE-OFFS:  These may or may not need to be paid to qualify for a mortgage.  If there is one charge-off and otherwise good credit, then you may not have to pay.  If the charge-off is old and under a certain dollar amount, it may not have to be satisfied to qualify.  Worse case situation, you can contact the original or 3rd party debt collector and work out a settlement.  They may not remove it from your credit report, but it will show that it was paid, and thus helping you to qualify for a loan.  This can be a confusing process and we recommend that you call us when handling these situations.

MEDICAL COLLECTIONS;  Many times all medical collections do not need to be paid to qualify.  We at Kirkpatrick & Associates can help with this.  We specialize in helping with 3rd party collections.  If you are receiving too many or unwanted phone calls, we can stop the collectors from calling.

RENTAL HISTORY:  Yes, a potential borrow can use rental history for credit when applying for a home loan, even when it’s not reflecting on your credit reports.  Be sure and pay rental payments on time.  Mortgage underwriters will require your rental history.

SELF-EMPLOYED OR 1099:  You will need two years work history.  Check with your lender for their guidelines.  These can vary between lenders.

Do keep in mind that after taking care of all of these areas on your credit, you must have good accounts reporting on all of your credit reports.  You credit score must be at least 580 for some lenders and 620 for others and 640 for most any lender.  If you score is between 580 and 639 be prepared to have a larger down payment.  A down payment is usually 3 to 3-1/2%.  A lower credit score would require a much higher percentage for down payment.  Please note:  Do not depend on the scores from Credit Karma or any other 3rd party credit score service that does not specifically provide FICO scores.

We, at ReScore Solutions eat, think and obsess over credit related stuff.  We would love to help you through the credit maze.  It can be confusing and intimidating when trying to deal with credit related matters and paying collections.  We view your credit reports for any violations of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.  While you are spending time with your family we are working hard for you.

Help with bad credit
Family time!

Know Your Rights When Shopping for Credit

Ready to purchase a car or mortgage?  Shopping around for a great rate can save you thousands of dollars over the life of the loan, not to mention that some banks charge application fees where credit unions usually to never charge extra fees.  Credit unions can be a great source of lower interest rates and easier qualifications for getting the loan.

When shopping for great rates and services ask as many questions as possible before having your credit reports pulled.  These are considered “hard” pulls and will lower your FICO scores.

The Equal Credit Opportunity Act protects you when dealing with obtaining new credit with anyone who regularly offers credit.  This includes banks, finance companies, stores, credit card companies and credit unions.  When you apply for new credit, a creditor may NOT:

Credit rights
Applying for credit?  Know your rights.

1.  Ask about your marital status or your spouse, unless you are applying for a joint account or relying on your spouse’s income, or you live in a community property state.  ( Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin)

2.  Ask you if you plan to have children or if you plan to raise children.

3.  Ask about or consider your race, sex, religion or national origin.

4.  Refuse to consider public assistance income or regularly received alimony or  child support as income.

5.  Refuse to consider income because of our sex or marital status or because it is from part-time work or retirement benefits.

You have the right to:
1.  Have credit in your first name, birth name,and your spouse/ partner’s last name, or your first name and a combined last name.

2.  If a co-signer is necessary, it can be someone other than your spouse.

3.  After you change your name you can keep your own accounts or marital status or retire, unless the creditor has evidence you are unable or unwilling to pay.

4.  Know why a credit application was rejected.  The creditor must give you the specific reasons or tell you where and how you can get them if you ask within 60 days.  Once you receive the letter from the creditor, the letter usually will inform you of your FICO credit score and give you reasons why you were turned down.  The letter will also state which credit reporting agency the creditor requested your credit reports.  You have the right to contact that credit reporting agency and request a copy of your complete credit report so that you can review it for any inaccuracies.

5.  You have the right to have accounts shared with your spouse reported in both your names.

6.  You have the right to know how much it will cost to borrow money.

7.  YOU HAVE THE RIGHT TO A FREE ANNUAL CREDIT REPORT .   You can request these once every 12 months.  When denied credit you are entitled to an additional, free, credit report from the credit reporting agency that the creditor requested your credit report.

To learn more of our services on how we can help you with your credit issues, go to our website at www.kirkpatrickassoc.com .

Call us if you have questions about your credit.  205-352-3448.  Monday – Friday 8:30 to 5:30.