If you are looking to apply for an apartment, you may need to check your credit score. Credit scores are created through credit history, and a high credit score is a marker of financial responsibility. If you have a low credit score, do not fear – credit scores are constantly changing, and though it may take some work, every credit score can be improved.
What is a “good” credit score?
A score of 800 is often lauded as the ideal credit score. A score of 800 tells lenders and landlords that you are extremely fiscally responsible and is a marker of excellent credit. If your credit score is less than 800, that doesn’t mean it is bad. A score of 670-739 is considered good, 740-799 is very good, and 800 or above is excellent.
What impacts a credit score?
There are five major factors in determining your credit score:
- Your payment history, including if you paid the minimum payment, full balance, and if you paid your bill on time
- Credit cards come with limits, and if you exceed your limit it can negatively impact your credit score. To be considered a “safe borrower,” you should use 30% or less of your allotted credit.
- Length of history impacts your score – the longer your account is open, the better. Closing an account quickly can negatively impact your score.
- A mix of credit sources (that are used and paid for responsibly) will also positively impact your score. This means having a mortgage, a car payment, and multiple credit cards.
- While diversifying your credit sources, applying for multiple credit cards at once can temporarily lower your score.
Ways Credit Score Impacts Your Apartment Search
One of the first questions you’ll receive from a landlord, real estate agent, and or property manager during your apartment search process is “What is your credit score?”. There is no legally required minimum credit score needed to rent an apartment. Minimum credit scores can vary by area, and usually, each landlord will have their own set minimums. For renters searching for New York City apartments, most landlords will prefer for you to have a minimum 650 credit score.
How to Improve Your Credit Score
Improving your credit score won’t happen overnight, but these are a few tips from us and the Federal Reserve if you’re looking to raise your score.
Get copies of your credit report and verify all of the information
Before trying to improve your credit, you need to know where it stands. Annualcreditreport.com is the only authorized website for a free credit report. Under federal law, you are guaranteed a free credit report from each of the three major credit reporting companies (Experian, Equifax, and TransUnion) each year. You can monitor these reports for any mistakes. If there are any, you can report them to the credit bureau to have them fixed. Though mistakes are rare, they can negatively impact your credit score, and it’s crucial to have them remedied quickly. For more information on correcting a mistake on your credit report, you can visit the Federal Trade Commission website.
Pay your bills on time
Payment history and timeliness are important factors in your credit score, and one of the best things you can do for the health of your credit is to pay on time. If you are prone to forgetting deadlines, many companies will let you set up automatic payments on their website to ensure your bills are always paid on time.
Keep accounts open
Length of credit history is important for your credit score. Even if you have old accounts you don’t use anymore, you should keep them open to maintain your credit history with the company.
Mix your credit sources
Having a diverse array of credit sources, including a mortgage, auto loans, student loans, and credit cards, can prove financial responsibility and improve your credit score. However, be careful only to take on credit you can manage responsibly. Opening too many accounts or go into too much debt, it can backfire and lower your credit score.
Maintain a low credit utilization ratio
The amount of credit you are using versus your credit limit is what is known as your credit utilization ratio. Though it may seem like you should be allowed to use all of the credit you are allotted, it reflects best on your credit report if you keep your credit utilization ratio under 30%. For example, if you have a $5000 credit limit, you should use $1500 or less of your credit.
Pay off outstanding balances
If you have open lines of credit with high balances, paying off your credit cards can immediately improve your score. Pay as much down on these accounts as possible to decrease your credit utilization ratio.
Increase your credit limit
If you are unable to pay off your outstanding balances to decrease your credit utilization ratio, you can request an increase in your credit limit. Even if you still have an outstanding balance, increasing the credit limit will improve your utilization ratio and thus, your credit score.
Limit hard inquiries
When you apply for a new credit card, the credit company will do what is called a “hard inquiry” or “hard pull.” This lowers your credit score temporarily. While it is good to have a wide array of credit cards, avoid applying for multiple cards at once to avoid lowering your score.
How long does it take to improve your credit score?
Improving your credit score takes time and continued demonstration of fiscal responsibility. Paying bills on time for one month may see a slight improvement in your score, but it can take years to build a positive credit score. The timing of improvement largely depends on where your credit score starts, how long your credit history is, and how many sources of credit you have. Beware of any quick fixes to your credit score – though you may see advertisements that promise to “wipe away your credit history,” there is no shortcut to a good credit score.
Increase Your Credit Score Quickly
If you’re reading this article, it’s likely that you’re already deep in the process of apartment hunting and need tips on improving your credit score quickly. The priority should be to pay all of your outstanding debts as soon as possible. This will help decrease your overall credit utilization score. You may be tempted to open a new credit card, which will increase your credit limit. However, as mentioned, the hard inquiry will decrease your credit score. Prioritize decreasing your outstanding debt to effectively increase your credit score.
In conclusion
Your credit score may seem like just a number, but it can affect your ability to purchase a home or qualify for an apartment. If you’re looking to move and cannot improve your credit score immediately, you can also find a guarantor, provide a landlord with proof of assets, or sublet. These options can help you find housing in the short-term while working to improve your credit. Raising your credit score may seem like an uphill battle. If you continue to manage your finances responsibly, keep a low credit utilization ratio, pay bills on time, and diversify your credit sources, your credit score is bound to improve over time.
