Before signing on the lease, the owner of the property will check your credit report. So, it is better to know what credit score is needed to rent an apartment?
The article will give you an insight on what is a credit score, on what factors does it depends, how can you establish a high credit score, how much you need to rent an apartment, and how can it work with money borrowing.
What is a Credit Score?
A three-digit score generated by the credit bureaus that helps in accessing the risk is called the credit score. An algorithm generates the score using your financial history that is used by the financial companies and the lenders as a factor for making a decision regarding money lending. The credit bureaus will report the credit scores by gathering the financial data from lenders, your usage of credits available and other related factors.
How is it calculated?
The credit score depends on the following factors:
- Amount owed: 30%
- Payment history: 35%
- Credit history length: 15%
- Types of credit: 10%
- Inquiries on account: 10%
How to generate your credit score?
You can get your free report from any one from the three credit reporting agencies – Experian, TransUnion, and Equifax. This can be generated through many third party institutions that can give you an updated report. You can request a separate credit score from each of the reporting agencies so that you can review each report and check for any inconsistency and inaccuracy.
How a credit score is used for renting an apartment?
The credit score evaluates the credit risk involved in the lending. The lenders use credit score as a universal term to access the risk involved. The higher the credit score, the lower is the risk. When you apply for an apartment, the lender will evaluate you by generating your credit report through the credit reporting agencies and reviewing it.
It may seem that your credit score has nothing to do with renting an apartment, but it is not true. The credit score will let the lenders evaluate you based on your score. It will help in analyzing your paying potential. It can tell them if you are a good payer and can not only pay the full rent every month but can also pay on time and in full at once.
A broker, lending company or the landlord will use third party websites to generate your detailed credit report and FICO score. They will analyze the report and judge whether you are a risky or good borrower
The higher the credit score the lesser is the risk involved in lending the apartment, so you should always try to increase the credit score to be the best candidate for the landlords or the lending agencies. However, there is no set limit on what credit score is needed to rent an apartment. The rental companies and landlords will check your score to make sure that you can afford the rent. It is their call on what score they call it safe enough to lend you the apartment.