Bankruptcy and foreclosure have a devastating effect on your credit scores and your poor credit presents a problem when you try to rent a home. Landlords generally ask permission to review your credit reports before approving your rental application. Your credit history helps a landlord or property manager determine if you are likely to be a responsible tenant and pay your rent on time. Fortunately, you have rental options – even with credit damage as severe as a recent bankruptcy or foreclosure.
Explain Your Circumstances
If you know your credit doesn't meet the landlord's requirements, be honest about that fact. Explain the circumstances surrounding your bankruptcy and foreclosure and how your circumstances have changed. For example, if you lost your home to foreclosure, you could explain to the landlord that an unexpected job loss left you unable to pay your mortgage, but you have a new job and will be able to handle your rental obligations. Your prospective landlord may be willing to overlook your poor credit if he believes your credit problems were the result of circumstances beyond your control rather than poor debt management habits. In general, private landlords have the freedom to be more flexible with credit approvals than property management companies.
Prove Your Income
You can increase your chances of being approved for a rental property by demonstrating to your prospective landlord that you can afford the monthly rent. Most landlords will want to see that your rent does not exceed 40 percent of your income. Give your pay stubs to the landlord along with your rental application. Pay stubs demonstrate to your landlord that you not only have a steady job, but earn enough money to pay your rent without difficulty each month.
Get Letters of Reference
If proving a reliable income and explaining the circumstances behind your poor credit history aren't enough to sway the landlord, consider obtaining professional letters of reference. A letter from your employer verifying your employment and noting your positive performance on the job will show that you have a steady job and a high responsibility level – things landlords want to see. A letter of reference from a previous landlord noting that you always paid your rent on time and were a responsible tenant may prove even more beneficial because it answers the question your landlord wants to know most: Will you pay the rent?
Get a Co-signer
If a prospective landlord has strict credit policies and won't consider your circumstances, a co-signer who meets the landlord's credit requirements can help you get approved for housing. Like a co-signer on a loan, a co-signer on a rental application agrees to pay the landlord any rent or fees you fail to pay. In some states, the landlord is free to pursue your co-signer for payment without first trying to procure payment from you. Thus, it is imperative that you pay your rent on time, follow the terms of your lease and leave the apartment in pristine condition when you move out, lest your landlord hold your co-signer financially responsible for your mistakes.
References & Resources
- Claiming Bankruptcy: Renting After Bankruptcy and Foreclosure
- AOL Real Estate: Renting With Bad Credit
- CNN Money: Renting With Bad Credit
- Zillow: What Information Do Property Managers/Landlords Review?
- Rent.com: Finding Property Rentals With Bad Credit
- Inman News: A Painful Lesson in Co-signing Lease
- Freddie Mac: Options After Foreclosure
- Federal Trade Commission: Building a Better Credit Report
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