Late Payments Lower Your Score — And Could Prevent You From Getting a New Apartment

couple at their new empty apartmentYou were late on a bill or two last month, so what, right? While it’s true a late payment here or there probably won’t hurt your credit score too much, multiple late payments (even if it is within just one month) could do significantly damage. It’s important to pay your bills on time for good credit and for getting a new apartment. Apartment managers look at your credit score as well as your payment history to determine if you will be a reliable tenant, which means too many late payments could mean no new apartment for you.

The Myth About Late Payments

There is a common misconception out there that late payments don’t affect your credit score. But the truth of the matter is they do. Yes, if you catch up before the late payments are reported, you might get away with those late payments and no damage to your credit report, but frequently late payments can slowly damage your credit score over time — and take twice as long to repair.

Understanding the Derogatory Differences

Any late payments that are over 90 days late are considered major derogatory marks on your credit report and anything under 90 days is considered minor. If you have any major defaults, which is usually after 90 days — depending on the creditor — you’ll see a drop in your credit score. Also, credit accounts that are over 90 days past due often are sent to third party collectors and could lead to foreclosure, tax liens, judgments and harsh collection tactics.

Your Score and Credit History

It’s not just your credit score that you have to worry about. Apartment managers look at your overall credit history report. Even a good score could be denied if you have a history of late payments. Late payments are indicators that you handle your finances poorly and are unreliable — something apartment managers don’t want to see in tenants about to sign a lease with them.

What You Can Do

If you have late payments, sometimes you can talk with the creditor and see about reducing the days or erasing them. Even if the creditor won’t remove the late payment mark, you may have an excuse as to why you were late on your payments that month — such as a loss of job, medical emergency, etc. Regardless, have your reason and documentation proving that reason ready when you apply for a new apartment. Some apartment managers can override a poor credit score or history, especially if you have proof as to why this happened and you have a few months or years of positive payment history after that event.

If you are having trouble paying your bills, you may need financial counseling. It’s important to pay your bills on time and stick to a budget that is realistic. Limit your spending, track your finance and set up automatic payments or bill pay reminders so that you can reduce the number of late payments you have on your credit report.

Mar 2014

Got Bad Credit? Tips for Overcoming Credit Issues

Young couple buying or renting a home or apartment, they are meeIf you have bad credit, it can ruin your chances of getting the apartment of your dreams. These days’property owners are strict about credit requirements — as they should be. They need tenants they can trust and know will pay the rent when it’s due. But, even those with bad credit deserve a chance. If you have bad credit, there are some things you can do to increase the chances you’ll get an apartment despite that low credit score.

Explain Yourself

Everyone has difficulties in their financial situation. While you might have bad credit, you might also have an explanation for it. Sometimes a potential property owner will understand the reasons behind your poor credit, especially if you can back it up. For example, you lost your job or you encountered a medical issue that made it difficult to pay your bills on time. You pay them on time now, which you can prove. But, you can also show medical bills or unemployment records too to boost your credibility.

Use a Cosigner

Some landlords will give you the apartment if you have a cosigner with better credit. While this might not be ideal, it is a good way to get an apartment even if you have poor credit. Ask family or friends if they would mind, but remember that if they cosign, they are equally responsible for the lease. Therefore, only ask for a cosigner if you are responsible enough to follow the terms of the lease in the first place.

Ask About a Larger Security Deposit

Some apartments will overlook poor credit scores if you offer a larger security deposit. Because a poor score often means you are unlikely to pay your rent, the larger security deposit offsets the risk of any loss for the landlord. Sometimes landlords will request two to three times more, but they will overlook your low credit score.

Prove Your Worth

Property owners exclude people with poor credit because they are unlikely to pay. You can show your positive credit history by giving them references to collectors and debtors you’re paying now. Also, show paycheck stubs and income statements proving you can afford the new apartment. If you have a good relationship with a previous landlord, see if they will give you a good reference. Make sure they comment on your ability to pay rent — noting that you’ve never been late and always paid your rent in full.

Even with all of these things, some landlords might not approve you if you have poor credit. If that is the case, don’t get discouraged. Start working on improving your credit score and maintaining a positive credit history from here on out. While it might not help you today, maintaining a positive credit history for a few years can improve the chances you’ll be approved for an apartment in the future.

Mar 2014

Why You Should Run a Credit Check on Potential Renters

bigstock-House-And-Keys-42686932It’s not uncommon for property owners to feel bad about running credit checks on their potential renters — especially with the economy in a downward spiral these past few years. But, a credit check does a lot more than tell you the score of your potential — it also tells you information about how that future tenant will impact your property. With a credit check, you can uncover any missing information (especially information left out purposely on the application); therefore, it’s important to run a credit check on every potential renter.

Verify the Basics

With a credit check, you can verify the basic information about your potential renter, such as their name, address, birth date, and social security number. Many times, you can use the information from the credit check instead of running a background check, which saves you time and money. You can also see what previous places they’ve rented and if any of those previous landlords have reported them to the credit bureaus for non-payment. It isn’t uncommon for potential renters to hide previous rental information, especially if they skipped out on paying for their last property.

Payment History and Reliability

One of the most important things a credit check will do is tell you how reliable a tenant is at making his payments. Credit checks tell you if a potential renter is frequently late on his bills, how often he is late, if he has accounts in collections, etc. You can see how long ago some credit issues occurred — in some cases these late payments could be over seven years old. Also, you can see if they’re keeping current on their payments now, the number of closed accounts they have and their total debt.

Debt Issues

When a potential renter gives you his employment information, you use that income to verify whether or not a renter could pay your rent amount. A credit check can also tell you how much your potential renter pays each month in debts, which can help you determine if he can really afford your rental payment. For example, you have a renter who makes $800 per month and the rent is $200 per month. So on paper he looks like he can afford it, but if you calculate in the fact that he has $400 per month in debt, he is now pushing the limit on his income.

Credit checks might be a hassle and force you to turn down a tenant you grew fond of in an interview, but these checks are necessary to protect your property. Credit checks give you information that lets you decide whether or not a tenant will actually pay, his history for making payments, and his past rental history. You can always discuss the findings with your potential renter to see if they have a viable explanation. However, in the end, not running a credit check could mean you’re renting to a person that doesn’t intend to pay for his rental contract.

Dec 2013
POSTED IN Legal Tips