Securing An Apartment With Bad or No Credit
What is good credit in NYC?
A credit score can be considered “good” or “bad” (in “good health” or “bad health”). A good credit score is reflected by a high number, representing a history of consistent, timely repayment towards debt. Conversely, a bad credit score is reflected by a low number, which represents a history of inconsistent/late payments or defaults. As higher numbers are preferable to low numbers, the higher your credit score, the less risk you pose to your lender and the more likely you are to be approved.
There is no set figure delineating between good and bad credit; most people choose a number between 680 and 720 to delineate between the two; however, this is just a general guideline, as each lender has their own concept of what constitutes good and bad credit.
No credit means that a person has not taken money out in the form of a loan, credit cards, mortgage, student loans, or similar ventures. It can also indicate when someone is new to the US and has no credit history in the US (most, if not all, international credit scores and history are not accepted in the US).
What is considered bad credit? And how bad is bad?
Sadly, in NYC if you are below 700 you are at a bit of disadvantage. In reality, bad isn’t all that bad, but with such fierce competition, this can put applicants at a disadvantage.
Tell your real estate agent
If you don’t tell them, it will come to light anyway. Instead of wasting precious time, be honest with your agent so that they can present you with alternatives and the best plan moving forward. Don’t let your career deter you from your big city ambitions. If you are a freelancer, contract worker, or foreigner, for example, thorough preparation before meeting your landlord can get you in the right position. Your realtor can only help if they know the situation!
Cash is still king
A healthy down payment is always helpful, if your credit is good, but not great, this could help you win the lease on an apartment. There have also been many deals struck where paying up front for the entire year, or a large portion of the year has helped to secure an apartment for someone who has poor credit, no guarantor, or is not a US citizen with a credit history.
Find a guarantor
Whether it’s a parent, sibling, close contact, or someone else you trust, if you have bad credit, having a co-signer or a guarantor on your lease can be very helpful. Many young, first-time renters will encounter cautious landlords, so having a trustworthy guarantor helps settle minds. Guarantors must submit a substantial amount of paperwork and proof that they make at least 80 times the monthly rent, if not more, to be allowed to sign as a guarantor. It is also common for guarantors to have to submit additional financial information as well as live in the Tri-state area, although this is not true for all buildings.
Insurent is a third-party company that agrees to fulfill the obligations of a guarantor on behalf of a tenant. In other words, they provide a form of rental insurance to the prospective tenant that ensures rent coverage if the tenant ever fails to pay. Insurent provides service in exchange for an upfront fee of anywhere from 75-90% of one month’s rent (for those with no credit history this figure can be as high as 110%). An applicant still must have a good credit score and an annual income of at least 27.5 times the monthly rent to work with Insurent.
Roommates and subletting
Another way around this issue is by finding an apartment with roommates who have better credit than you. This way you can apply for a nice apartment and not have to worry about your credit getting in the way. You can also fill an individual room or sublet and come to an individual agreement with the renters or subletters. Individuals are often more lenient than a corporate management company or landlords and are comfortable with just a simple sublease contract.
Most landlords require that you must make around 40 to 50 times the monthly rent in annual salary, so if you make more than 40 to 50 times, say 70 times the rent, but have mediocre credit, there may be more leeway.
It’s also helpful to provide letters of recommendation from previous landlords, employers, current employers, previous roommates, or any other relevant people in your specific situation. This will not only make you seem more human, but provide real-life references for your character and habits. While these references generally aren’t required, they can often persuade a landlord to choose you over a similar applicant.
Even with bad or no credit, there are ways that you can secure a rental property in NYC. Dwellworks Property Advisors will go to great lengths to help you get settled in the Big Apple as quickly as possible.