Past financial challenges notwithstanding, it is possible to rent an apartment with bad credit.
People end up with red marks on their economic report cards for all kinds of reasons and property management professionals know this, so many allow for co-signing companies. These cosigning companies can help potential tenants around what would otherwise be a credit-check roadblock to renting.
The premise is pretty straightforward: For a fee, the cosigning company will guarantee your lease for a given period of time, even if your income or credit history is shaky. Should you default on your lease, the company pays your landlord.
In financial climates like today’s, the service is in demand, and while it can be a good tactic in some cases, other options may serve renters more sensibly.
Determining where you fall just requires a little research.
Co-signing companies guarantee your landlord or property management company that your rent will be paid.
Like most things, qualifying requires an application. You can do this before you set out on your apartment search or after your rental application has been declined. Prequalification may help you avoid the latter if you think renting with bad credit is going to be an issue. As with some apartment complexes, co-signing companies often charge a fee at application – these generally range between $50 and $125. Additional fees (background checks or processing) may also apply – so shop around!
Once approved, the apartment search can begin in earnest! Co-signing companies provide approved applications with a certification of how much of your rent they will guarantee. Include your certificate with your apartment rental application for verification and you are on your way to a move-in date.
Sounds great, right? It can be, for the right person. But there can be risks, as well.
Co-signing companies will add to your monthly expenses, sometimes up to 10 percent, making it doubly difficult to afford your rent. On top of that, if you don’t qualify, all those up-front fees are likely nonrefundable. Find out the policies before signing your name. Some co-signing companies will refund your application fees if you don’t qualify.
Some co-signing companies will only cover a portion of your lease. For example, an agreement may only guarantee rent for a quarter or half of your year-long lease, leaving you vulnerable for the other six or nine months. Check ahead of time, as some apartment complexes will want your entire lease term covered.
It’s always a risk. If you are in a high-demand field but are moving to a new city before you’ve secured employment, you might deem the odds for a favorable co-signing experience in your favor. Similarly, if renting with bad credit is a concern, but you’ve already gotten yourself back on track – with a proven history – and your employment is secure, that might mean you’re ready to roll the dice to sign.
Also, important to remember: Co-signing companies are a relatively new industry so they inherently riskier. Check with the Better Business Bureau before choosing.
Renters need to be accountable, but so, too, do the companies who claim to serve them. Make sure you’re dealing with a reputable firm.