Rental Application Denied Due to Credit: What to Do Now

You find the perfect apartment, but the property manager denies your application due to a low credit score. What can you do next? What options do you have?

This article covers the key reasons landlords deny rental applications based on credit, and what you can do about it. You'll learn how landlords use credit reports in the application process and common reasons for credit-based rental denials.

We'll explain the steps to take if your application gets rejected, and we'll outline your legal rights. You'll also find strategies to improve your credit score and alternative options for securing a rental with bad credit.

We cover practical advice for all parties during the rental process, even when dealing with credit challenges.

Credit reports and rental applications

Property management companies and landlords use credit reports to assess how reliably you manage your financial obligations, which they consider an indicator of your likelihood to pay rent on time.

Key pieces of a credit report include the following:

• Personal information: This section includes your name, address, Social Security number, date of birth, and other identifying information.
• Credit history: This details your previous and current credit accounts, including types of accounts like credit cards or car loans, account balances, credit limits, and payment history.
• Public records: Reports include public records related to your credit, such as bankruptcies or foreclosures.
• Inquiries: As companies or property managers request reports, these requests show up as an inquiry. Too many inquiries can be a red flag because it usually means you're looking to increase your debt load.
• Credit scores: Your report includes a numerical scores assigned to your creditworthiness by different credit bureaus. Scores come from the information in your report and are in the range of 300 to 850.

Denial based on credit report

If you get denied because of a poor credit score, it's likely due to one of these reasons:

• Late payments: If you have a history of consistently late payments on credit cards, loans, or other financial obligations, landlords might have concerns about your ability to pay rent on time.
• High credit utilization: If you have high credit card debt or are using a large percentage of your available credit, this indicates financial stress and that you're living beyond your means. A property management company or landlord may question your ability to pay monthly rent.
• Limited credit history: A very short credit history can make it difficult for landlords to assess your financial responsibility, leading them to err on the side of caution and deny your application.
• Bankruptcy: A recent bankruptcy on your credit report raises concerns about your financial stability, and many landlords see this as too high a risk.
• Foreclosure or eviction: A past foreclosure or eviction record means you've had serious housing-related financial issues before, making landlords wary of entering into a rental agreement with you.

Other reasons for rental application denial

Besides your credit score, landlords look at other factors to see if you will be a reliable tenant and may deny your application for reasons such as the following:

• Financial concerns: You'll need to have enough income to support the monthly rent. Landlords will use income verification to make sure you have an income of 2-3 times the monthly rent — and that you have stable employment.
• Negative rental history: Your past experiences as a tenant matter. Landlords may deny your application if you have a history of evictions, conflicts with previous landlords, or property damage.
• Background check: If you have a criminal history, especially for violent crimes or drug-related offenses, this can cause the denial of your application.
• Applications: If you submit incomplete, inaccurate, or falsified information on your application, this can cause an immediate rejection. Failing to pay the application fee, not following the proper procedures, or refusing to consent to background or credit checks can also lead to denial.
• Lifestyle: Your application might be denied if aspects of your lifestyle don't align with the property's policies. This can include things like pet ownership or smoking.
• Personal impression: If you come across as unreliable, disrespectful, or difficult during the application process or in-person interviews, landlords may choose to deny your application.

What to do if the landlord denies your application

Receiving a denial for an application can be frustrating, but it’s not the end of the road. There are proactive steps you can take to improve your chances of finding a rental property in the future.

Understand the reason for denial

The law requires the landlord to provide an adverse action notice if they deny your application due to your credit report. This document outlines the specific reasons for the denial and give you insight into what you need to address.

You should request a free copy of your credit report from the credit reporting agency listed in the notice and look for negative marks that affect your score.

Dispute any inaccuracies

If you find things in your report that aren't correct, you have the right to dispute them with the credit reporting agency. Correcting these errors is worth it since it can improve your score and may lead to a different outcome in future applications.

When filing a dispute, provide any documentation that supports your claim, such as proof of payment or records of debt settlement. This can expedite the correction process.

Take steps to improve your credit

Reducing your outstanding debt helps your credit score and can make you a more attractive candidate. Showing a consistent pattern of on-time payments can also improve your credit over time. Set up reminders or automatic payments to make sure you don’t miss any due dates.

If you have a limited credit history, you can also get a secured credit card to help build credit.

Strengthen your next application

Some options you can try to improve your next application even with bad credit include the following:

• Additional documentation: Include extra documentation with your next rental application, such as proof of income via pay stubs, bank statements, or a letter of recommendation from a previous landlord.
• Provide financial assurance: Offer a larger security deposit, or offer to pre-pay several months' rent upfront to show your financial commitment and help reduce the landlord's concerns.
• Co-signer: See if a family member or friend with good credit would be willing to co-sign your lease. A co-signer adds a second responsible person and provides additional security for the landlord.

Individual landlords

Smaller independent landlords may not require a credit check or may be more flexible with credit issues. These landlords may be open to negotiation, especially if they don’t have other applicants. You can discuss your situation honestly and offer solutions such as a larger security deposit.

Real-world tips for potential tenants

In the r/personalfinance subreddit, u/4real_thistime asked for help finding a new apartment with bad credit. The poster explained that they and their significant other (SO) were being denied rentals due to the SO's poor credit history, despite the poster having an excellent credit score.

Their current lease was ending, and they couldn't renew because the landlord was selling the property. The couple's combined income was sufficient, but the poster alone didn't meet the 2.5x rent income requirement for a single applicant.

Community suggestions from the thread:

• Recommendation letter: u/Narrow-Subject37 advises, "If you were on good terms with your current landlord, see if they can write you a recommendation letter."
• Smaller property management firms: u/TacoNomad suggests, "Google 'property management xxxxcityxxxx'. This will pull up smaller management firms that handle individual properties or smaller complexes. I've had to do this. Then, go plead your case. Be blunt, take ownership of past mistakes, explain how you're more mature now and understand the importance of paying bills on time."
• Apartment finders or realtors: u/Frognosticator recommends, "Another option would be to speak to an apartment finder, or even a realtor. Apartment finders will send you listings, and might help you work through some of the credit-related issues with landlords."

Legal protections and rights for renters

Renters have legal protections and rights when landlords use credit information during the rental application process. These rights include the following:

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act is a federal law that governs how landlords and property managers use your credit information. Under the FCRA, you have several key rights:

• Right to be informed: Landlords must inform you if they plan to use your credit report as part of the rental application process.
• Right to consent: A landlord must get your permission before pulling your credit report. They usually do this through a signed consent form.
• Right to adverse action notice: The notice must include specific reasons for the denial, provide contact information for the credit reporting agency (CRA), and inform you of your right to obtain a free credit report from the CRA within 60 days. You also have the right to dispute any inaccuracies found in the report.

State and local laws

In addition to federal protections, many states and local jurisdictions have laws for additional protections for renters and credit checks. Common examples include the following:

• Credit history discrimination laws: Some states and cities have laws that restrict landlords from denying rental applications solely based on credit history.
• Limits on credit check fees: Certain states limit the amount a landlord can charge for conducting a credit check as part of the application process.
• Sealed or expunged records: In some jurisdictions, landlords cannot consider sealed or expunged credit records, such as those related to bankruptcy.

Right to dispute inaccurate information

If you believe that your credit report contains errors that led to the denial of your rental application, you have the right to dispute the information. Here's how you can do this:

• Contacting the credit reporting agency: Submit a dispute with the CRA that provided the report. They must investigate and correct any inaccuracies within 30 days.
• Providing proof to the landlord: If the CRA resolves the dispute in your favor, you can give the corrected report to the landlord and ask them to reconsider your application.

Right to privacy

Landlords must protect your credit information and cannot disclose it to unauthorized parties. They should use your credit report only to evaluate your rental application and for no other purpose.

Equal opportunity protections

Under fair housing laws, landlords cannot discriminate against you based on protected characteristics such as race, color, national origin, religion, sex, familial status, or disability. This includes decisions a property owner makes using credit data.

If you believe the landlord denied your application due to discrimination rather than creditworthiness, you have the right to file a complaint with the Department of Housing and Urban Development (HUD) or seek legal counsel.

Solutions for rental challenges

Azibo's comprehensive property management platform offers solutions to address credit-related challenges in the rental market to help both tenants and landlords.

For tenants: improving your credit score

Azibo's Credit Boost reports your on-time rent payments to major credit bureaus. This helps build credit and improves future rental applications and loan terms.

For landlords: tenant screening

Azibo offers detailed tenant screening to aid landlord decisions. It provides credit, background, rental history, and income checks, offering a complete profile of potential tenants.

Denied apartment because of credit

Bad credit doesn't have to be the end of your rental search. While a low credit score can make finding an apartment more difficult, you do have options. Understanding how landlords use credit reports, knowing your rights, and improving your financial standing can all help increase your chances of approval.

Dispute any errors on your credit report, explore alternative housing options, and prepare to offer additional assurances to potential landlords. These actions can help overcome credit-related obstacles in your rental search.

Keep at it, even if your credit isn't perfect. If you hit a wall, local housing groups or credit counselors can give you specific tips to help you land a place. Don't give up — there's usually a way forward, even with bad credit.

Rental application denied due to credit: FAQs

How do you respond to a rental rejection?

Politely ask for the reason, review your credit report, and improve any issues before applying again.

Can you be denied an apartment for credit card debt?

Yes, if your credit card debt indicates financial instability or a high risk of missed rent payments.

How do you explain no rental history?

Explain that you’re a first-time renter and highlight your financial stability, reliable income, and any references that show responsibility.